UK Finance, the trade association that replaced the Council of Mortgage Lenders (CML), estimates that gross mortgage lending reached £22.1bn in June. This was 9% higher than May’s lending total of £20.bn, and 3% higher than the £21.5bn lent in June last year.
Gross mortgage lending for the second quarter of 2017 was therefore an estimated £60.3bn – a 3% increase on the first quarter of this year and a 6% increase on the £57.1bn lent in the second quarter of 2016.
Despite this, UK Finance warned that the housing market has reached a plateau as activity and lending have been flat since the start of the year.
Senior economist Mohammad Jamei said: “A period of belt-tightening now seems to be underway as inflation begins to erode consumer spending power, and consumer confidence weakens. Given that the economy and housing market are closely linked, this has contributed to the activity plateau since the start of the year.”
He added: “Looking ahead, housing market activity is likely to reflect economic conditions – a deterioration would likely dampen first-time buyer numbers and homeowners remortgaging – the factors that have supported lending recently.”
First-time buyer activity is the only part of the market that has shown consistent growth recently. Homemover numbers have been slowly falling, on a 12-month rolling basis.
However, the trade body said if lenders shifted away from higher loan-to-value (LTV) lending as suggested by the Bank of England, this will limit first-time buyer activity.
Buy-to-let has been more volatile given the tax changes last year, but is currently deeply in negative territory, UK Finance added. This includes buy-to-let remortgage activity, which had been growing until recently.
Over the last two months this trend has reversed, as the number of loans for remortgage on a 12-month rolling basis fell relative to the 12 months preceding it. Tax changes are likely to be one of a number of factors putting off some landlords from remortgaging.
Jeremy Duncombe, director of the Legal & General Mortgage Club, said the figures showed that gross mortgage lending remained strong in June, despite “political rumblings”.
And lenders were also more positive.
Jeff Knight, marketing director of Foundation Home Loans, said: “On the surface, it may not seem like lending levels are particularly strong but look a little closer and re-mortgaging activity is keeping things moving along quite nicely. This is despite the challenge of inflation outstripping wage growth – as we may have seen an unexpected dip at the last reading, but inflation remains on an upward march.”
Adrian Moloney, sales director of OneSavings Bank, added: “The mortgage market has faced its fair share of challenges in recent months, but despite these headwinds, lending activity continues to grow.
“On the one hand, real incomes are being squeezed as rising inflation overtakes the pace of wage growth, which is going some way to weaken demand for new purchases, but there remains a strong undercurrent of remortgaging activity as people look to take advantage of low mortgage rates driven by rock bottom interest rates.”
Moloney predicted that there may be a summer activity spike as landlords come to terms with the impending PRA changes.