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First-time buyers reach decade-high but signs of ‘subdued’ market – UK Finance

  • 13/02/2018
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First-time buyers reach decade-high but signs of ‘subdued’ market – UK Finance
First-time buyers (FTBs) reached 365,000 in 2017- the highest number since 2006, UK Finance’s latest mortgage trends update revealed.


However, mortgage lending for FTBs, movers and buy-to-let (BTL) purchases all fell in December compared to the previous year.

There were 30,800 new FTB mortgages completed in December, a 5.2% decrease compared to the same month in 2016. Lending was at £5.1bn, 1.9% down year-on-year.

The number of new home mover mortgages completed in December fell 4.7% to 30,000. While new lending in the month was 3% down.

New BTL house purchase mortgages also fell, by 17.2% to 5,300 in December. By value, December 2017 saw £0.8bn of lending, 11.1% down.

BTL remortgages were also down 11.6% to 9,900. And by value lending was down 11.1% to £1.6bn.

However, new homeowner remortgages were up, jumping 7.4% to 30,500 completions, with the value rising by 8.3% to £5.2bn.

On a full-year view, the 365,000 FTBs represented an annual increase of 7.4% from 340,000 in 2016.

“This is fantastic news for the mortgage market, showing that initiatives like help to buy and the stamp duty rules brought in in November are having a hugely positive impact,” commented John Phillips, operations director at Just Mortgages and Spicerhaart.

Phillips continued: “First-time buyers have never been in a better position and the injection of capital into the market through these first-time buyer purchases will have a positive effect on the whole sector.”


Flat horizons

Despite the positive FTB figures, some commentators are expecting a lacklustre purchase market in the coming year – and a potentially dominant remortgage market.

Jonathan Sealey, chief executive officer at Hope Capital, commented: “Following the governor of the Bank of England’s clear indication to expect further interest rate rises sooner than was expected, the trend at the end of 2017 looks set to continue.

Sealey continued: “If interest rates rise it will put more pressure on FTBs’ affordability, which could stagnate what has been the most buoyant aspect of the housing market.”

“It is likely to be the remortgage market that becomes dominant,” he added, “There could be some good deals on longer-term fixes as lenders, with targets to meet, look to increase their share of the remortgage market.”

Commenting on the data, Paul Smee (pictured), head of mortgages at UK Finance, said: “2017 saw the number of first-time buyers reach its highest level in a decade, which is welcome news for those getting started on the housing ladder.

“Although the market remains competitive, there is no room for complacency – with weaker December figures consistent with our market forecast of subdued growth this year.

“We are also seeing a less buoyant BTL market, which continues to be impacted by recent tax and regulatory changes. This will continue to flatten gross lending volumes this year.”


Too early to call

Other commentators, however, argued it is still premature to pronounce a flat market based on December trends.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These figures don’t tell the whole story. December results are notoriously difficult to use to identify a trend because of the peculiar nature of the festive season where people often put decisions on hold.”

Leaf continued: “What we do know is that this year has started fairly typically in that viewings and instructions are up although buyers are naturally nervous about making commitment until they see which way prices are moving.”

“Encouraging, first-time buyers are starting to replace investors at the smaller property end of the market, which is good news news because they buy at the bottom and trade up where as investors tend to buy there and stay there.”

Likewise, Phillips of Spicerhaart argued that with December being a “traditionally quieter month for mortgages”, the year ahead may still in line for growth.

“We are now heading into a traditionally buoyant time for the housing market,” he said.

“Purchase and remortgaging will continue to rise as the appetite for first time purchases continue, and those coming to the end of fixed-rate and interest-only deals look to take advantage of record low rates.”

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