The amount of mortgages offered to first time buyers and those moving home dropped by 16% in the year to February, the Council of Mortgage Lenders (CML) found.
The CML says that the normal lending dip in the early part of the year has been worsened by the general election, which may have caused buyers to avoid moving until they find out who will be in power. An upturn in lending is expected in the summer.
Bucking the trend, lending to buy-to-let investors has increased yearly by 11% from February 2014. 15,900 loans were approved in February 2015 worth a collective £2.2 billion.1
Some estate agents believe that new pension rules, allowing over-55s to withdraw from their retirement savings, have encouraged them to invest in the buy-to-let market.
Yesterday, we revealed that buy-to-let investors have seen 1,400% returns. Read more here: /1400-returns-create-buy-let-landlords/.
Mortgage Lending Dropped by 16% in February
The CML found that so far the rise in buy-to-let lending has “almost completely” been a consequence of remortgaging. Lenders have been cutting their mortgage rates recently, as they expect an increase to the Bank of England’s (BoE) base rate to not be until next year.
For those stepping onto the property ladder for the first time, 18,700 loans with a total value of £2.7 billion were approved in February. This is a 1% drop on January and a 16% decrease on February 2014.1
However, the CML said that this was the second strongest February for first time lending since 2007, behind only February 2014 levels.
First time buyers needed an average deposit of 19% in February, compared with 17% in January. As mortgages are fairly cheap, first time buyers’ repayments make up 19% of their income, down from 24.8% in December 2007.1
The Office for National Statistics (ONS) also revealed that the average price paid for a home by first time buyers in February was £205,000, a rise of 7.4% on the previous year.1
For people moving house, 21,900 loans were made at a total worth of £4.1 billion in February, a 2% fall on January and 16% less than in February 2014.1
Director General of the CML, Paul Smee, says: “Seasonal factors have played their part in dampening house purchase lending activity in February. This typical seasonal trend may also be exacerbated by uncertainty ahead of the general election, but we still expect to see an upturn in the spring and summer months.
“Buy-to-let, in contrast, has shown year-on-year lending increases, due almost completely to remortgaging which is typically strong in the buy-to-let market.”1
Chief Executive of mortgage brokers SPF Private Clients, Mark Harris, says that in March, the mortgage market picked up, as is expected in spring.
He explains: “Buy-to-let lending is up year-on-year, proving its enduring popularity. The relaxation of pension rules this month is likely to provide a further boost for the sector. A combination of cheap mortgage rates, easing criteria and poor savings rates are convincing many that investment property is a sensible home for their money.
“Once election uncertainty is out of the way, we expect to see a flurry of activity in the mortgage market. There will certainly be plenty of cheap mortgage rates to tempt buyers.”1