Further indications that the property market is well on the way to full recovery came with the news that mortgage lending increased by more than a fifth during June.
The Council of Mortgage Lenders said that 61,000 loans, totalling £10.6bn, were advanced to people buying a home in the month. This represented a rise of 22% in number and 25% in value, in comparison to May.
A mixture of first-time buyers and homemovers drove activity rises, with lending to both groups increasing by around 25%. However, despite the significant monthly rises, 1% fewer mortgages were agreed in June than one year previously.
Remortgaging activity in particular soared by around 31% year-on-year, with totals also 30% greater than what they were in May. The Council of Mortgage Lenders attributed the large increase to a growing demand amongst homeowners to take advantage of the current range of competitive mortgage rates on offer.
Homeowners are looking to secure mortgage rates currently available before the Bank Rate begins to increase. Bank of England Governor Mark Carney recently indicated that the cost of borrowing could rise at the beginning of next year.
Paul Smee, director general of the Council of Mortgage Lenders, said that, ‘it is likely that people are now beginning to feel a rate rise is a realistic prospect and not just a distant theoretical possibility. After a slower than expected start to the year, lending now appears to be picking up as we expected and in line with our recently revised forecast.’
A record number of competitive mortgage deals on offer meant that first-time purchasers spent just 18.2% of their income on capital repayments and interest in the last month-the lowest total since the Council of Mortgage Lenders began tracking in 2005.
Mortgage lending up by a fifth in June
Additional data from financial information group Moneyfacts shows that first-time buyers are now £2,000 a year better off than they were just two years ago. Moneyfacts suggest the number of deals available to first-time buyers has risen from 42 in 2013 to 195 today. In addition, the lowest interest rate on a two-year fixed rate mortgage for someone with a 5% deposit has fallen from 5.59% to 3.49%.
Charlotte Nelson, finance expert at Moneyfacts commented that, ‘the launch of the Help to Buy mortgage guarantee scheme acted as a starting gun for this sector, making it almost acceptable to lend at higher loan-to-value again. Once these deals hit the market, other providers outside of the scheme had no alternative but to compete to attract customers.’
‘Not only are first-time buyers benefiting from more choice, but this fierce competition has caused rates to drop significantly to the lowest on Moneyfacts.co.uk records,’ Nelson added.