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UK Finance sees property transaction uptick as September lending dips

  • 25/10/2017
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UK Finance sees property transaction uptick as September lending dips
Gross mortgage lending dipped 12% between August and September, but was up 5% on September last year, although mortgage transactions overall rose, according to data from UK Finance.

The trade body estimates total lending of £21.4bn in September, compared to £24.3bn in August and £20.5bn in September 2016. (Click graph below to expand.)

It also predicted transaction levels, which have been largely steady since January, to recover a little further towards the end of the year.

House purchase approvals of 41,584 in September were a little stronger than the average of 41,006 over the previous six months and 7% higher than in September last year.

Remortgaging approvals of 29,570 were well up on the average of 25,577 over the previous six months and 20% higher than in September 2016. Other advances approved were 5% higher than September 2016.

UK Finance noted that since the instigation of Stamp Duty changes, activity by landlords had almost halved, while first-time buyers had picked-up much of the slack.




However, it said that more recently home mover numbers had shown some signs of growth, helped by low mortgage rates as debt service costs reached historic lows.

“Another factor that may have helped home movers is the change to the Prudential Regulation Authority’s (PRA) macro-prudential policy on loan-to-incomes,” it continued.

“This allows lenders to more effectively manage the flow of loans at high income multiples and has coincided with the proportion of home mover loans at or above 4.5 loan-to-income ratio to overtake that of first-time buyers.”

Other data from UK Finance showed that credit card lending had continued to grow, with annual volumes up across the whole credit card market at 7.8%.

Financial regulators have raised concerns about the growing level of consumer credit card debt, particularly for people who are using it to make ends meet for day-to-day spending.

The trade body added that business borrowing has slowed over the course of 2017, with the growth rate for borrowing by wholesale and retail businesses slowing the most, as these customer-facing sectors could be affected by any cutbacks in consumer spending.


End of an era

Connells Survey and Valuation corporate services director John Bagshaw explained that having benefited from a decade of low interest rates, consumers were sensing the risk that this era is nearing an end.

“Many older mortgage deals are expiring this autumn which will mean moving onto more expensive standard variable rates,” he said.

“As a result, homeowners on these deals are opting to refinance, taking advantage of the intense competition in the mortgage market right now. With so much economic uncertainty and hints of a base rate rise, many are choosing to lock into a lower rate to see them through the next few years.”

Landbay CEO and co-founder John Goodall noted the conditions were likely down to borrowers continuing to take advantage of record low interest rates and loan-to-value deals.

“These more accommodating borrowing conditions are however set to change in the coming months as the prospect of the first interest rate rise in almost a decade looms large, putting pressure on borrowers, and potentially putting off first-time buyers.

“September’s figures also offer some insight into the final month of lending before the PRA’s portfolio landlord changes came into effect. While these new regulations are a good thing for the sustainability of the buy-to-let sector, we may see a dip in lending in the coming months as the sector adjusts to both the new regulations and a possible rate change.”

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