Mortgage loan numbers near a two-year low

"The lull in moving activity appears stubbornly persistent", says the Council of Mortgage Lenders

£62.8bn of new residential loans was advanced to individuals in the final three months of 2016; that’s a 2.6% decrease compared to the previous quarter, and a touch (0.4%) lower over the past four quarters, according to the latest official quarterly stats.

At 22%, the share of first-time buyers in new mortgage advances reached its highest level since these stats started being collated in 2007. This coincides with the increase in high LTV lending – although this is still significantly lower than the “pre-crisis” level.

The proportion of total loan balances in arrears has decreased to 1.3% at the end of Q4 2016, the lowest level since the series began. The outstanding balance in arrears is now £17.2bn.

​These numbers come from the Mortgage Lenders and Administrators Return (MLAR), which aggregates data on mortgage lending activities provided by around 340 regulated mortgage lenders and administrators.

The Council of Mortgage Lenders, meanwhile, has found that the number of loans advanced for house purchase in January was at its lowest monthly level since February 2015; a near two year low.

The average amount borrowed by home movers in the UK increased to £175,500 from £175,000 in December, while the average home mover household income remained unchanged month-on-month at £55,000. The income multiple for the average home mover went from 3.32 to 3.34.

The CML recorded £8.4bn in home-buyer borrowing in January. That’s down 28% on December and unchanged on January 2016. This came to 45,700 loans, down 28% on December and 1% on January 2016.

Number of loans to home-owners, 2007-2016

First-time buyers borrowed £3.6bn for home-owner house purchase, down 29% on December but up 9% on January 2016. They took out 22,600 loans, down 29% month-on-month but up 7% year-on-year.

Home movers borrowed £4.9bn, down 25% on December and 4% year-on-year. This equated to 23,000 loans, down 27% month-on-month and 7% compared to January 2016.

Home-owner remortgage activity was up 54% by value and 46% by volume on December. Compared to January 2016, remortgage lending was up 22% by value and 21% by volume.

Gross buy-to-let saw month-on-month increases, up 11% by value and 12% by volume. Compared to January 2016,  both the number of loans and the amount borrowed decreased by 16%.

Number of loans for buy-to-let

The number of loans advanced for buy-to-let was the second highest monthly level since the changes to stamp duty on second properties in April 2016, behind November 2016. This activity was driven by buy-to-let remortgage lending which accounted for over two thirds of total lending. The number of loans for buy-to-let house purchase advanced in January was at an eight month low in part due to the traditional seasonal dip in activity in the winter months. By contrast, buy-to-let remortgage lending was at its highest monthly level, alongside November last year, since the stamp duty reform was introduced.

Paul Smee, director general of the CML: “January gives the impression of a flattish market overall, albeit one with a resurgent remortgage sector. We expect a seasonal dip in activity in the winter months and this appears to be the case in January. However, the lull in moving activity appears stubbornly persistent, and we have commissioned research on the reasons why the number of transactions seems in secular decline.

“Buy-to-let house purchase activity continues to be weak, despite strong buy-to-let remortgage levels. This will likely remain so going forward as lenders tighten affordability criteria ahead of the PRA mandated stress tests, and the introduction of tax changes in April.”

CML data tables

Number of loans for house purchase and remortgage in January

House purchase Remortgage
FTBs Movers Buy-to-let Home owners Buy-to-let
January 2016 21,200 24,700 9,700 33,200 13,700
December 2016 31,900 31,500  6,400 27,700 11,200
January 2016 22,600 23,000  5,900 40,300 13,900
1 month change  -29.2%  -27.0%  -7.8%  +45.5%  +24.1%
12 month change  +6.6%  -6.9%  -39.2%  +21.4%  +1.5%

Value of loans for house purchase and remortgage in January

House purchase (£m) Remortgage (£m)
FTBs Movers Buy-to-let Home owners Buy-to-let
January 2016 3,300 5,100 1,400 5,800 2,300
December 2016 5,100 6,500 900 4,600 1,800
January 2017 3,600 4,900 800 7,100 2,200
1 month change  -29.4%  -24.6%  -11.1%  +54.3%  +22.2%
12 month change  +9.1%  -3.9%  -42.9%  +22.4%  -4.3%