Home lending in 2016 saw its best opening quarter for nine years, according to the latest Mortgage Monitor from e.surv.
An average 71,710 house purchase loans were granted across the first three months of 2016, the highest opening quarter total since 2007 – which saw 116,898 granted. This was powered by a rush from buy-to-let landlords racing to beat April’s stamp duty changes.
However, March saw a monthly dip in lending as some landlords were too late to beat the stamp duty surcharges coming into effect on the 1st April, e.surv said. The month saw 67,173 overall house purchase approvals (seasonally adjusted) – 9.1% lower than the 73,871 seen in February. Despite this, March marked a return to normal activity with all borrowers, including first-time buyers, benefiting from a healthy range of mortgage products.
To date a total of 210,468 house purchase approvals have been granted this year, 13.5% higher than 185,356 in the first three months of 2015. House purchase lending has also risen annually – up 8.2% from 62,095 loans granted in March 2015.
Richard Sexton, director of e.surv chartered surveyors, said: “So far, it’s been a spring of sustainable lending. After a storm of activity from buy-to-let owners trying to beat the stamp duty deadline there’s been some more recent uncertainty about what the lending market will look like post-regulation. March has seen a calmer lending environment while remaining buoyant. Yes, house purchase loan numbers are slightly down – but overall borrowing levels are highly encouraging.
“Neither fears of the Mortgage Credit Directive, nor the stamp duty surcharge have been able to slow the momentum of current lending levels. Lending has proved yet again its resilience in the face of regulation and legislation. And it will be interesting to see how government initiatives, such as the lifetime ISA perform. March may not be the most impressive month numerically but it has set a sustainable standard for the rest of the year.
“It’s particularly encouraging to see first-time buyers enjoying a promising start to 2016. A lot of attention has centred on the buy-to-let sector lately, and potentially now it’s time that the first-time buyer market moves into the spotlight.”
March saw the proportion of small-deposit lending (to buyers with a deposit worth 15% or less of their properties’ total value) climb to account for 17.1% of overall house purchase loans granted. This marks a significant rise from the 15.7% proportion seen the previous month.
In absolute terms, small deposit loans granted in March totalled 11,487, slightly behind the 11,598 granted in February. However, on an annual basis this represents a huge increase of 19.3% from the 9,625 loans granted in March 2015.
The latest First Time Buyer Tracker from Your Move and Reeds Rains revealed February saw 21,100 first-time buyer sales, up 6.6% from 19,800 in February 2015. On a monthly basis, sales slowed slightly from 21,400 in January but this was alongside a 3.7% monthly rise in the average deposit, to stand at £29,451 in February.
Sexton said: “First-time buyers are finding their feet again. Lenders are keen to invest in first-timers and with a variety of rates and options available, there’s a raft of choices out there. And first-time buyers don’t appear to be overly cautious, as the proportion of small-deposit borrowing rises.
“But it’s not all smooth sailing. Many first-timers will have been eagerly awaiting the March Budget, hoping the Chancellor would usher in real changes to improve their homeownership prospects. What they got was a disappointment. Saving for a deposit is a real challenge for many, no matter what region of the UK you’re aiming to buy in, and house prices are hurtling ahead. Earlier initiatives like the Help to Buy ISA and Help to Buy Scheme have helped certain people, but have so far struggled to either have a widespread impact or solve the most serious problems. This new Lifetime ISA won’t significantly shorten the years aspiring buyers spend saving and will most likely struggle to make a real difference.
“Meanwhile, supply remains untackled by the government. The Chancellor had a real opportunity to spark homebuilding and bring more properties onto the market. Instead, some house hunters’ dreams of getting on to the property ladder are being pushed back ever further. For Londoners, a new mayor may bring new action, but first-time buyers across the rest of the UK could be waiting a while.”