UK Finance has reported that in May, home buyers borrowed £10.8bn, up 10% on April and 16% on May 2016. This equated to 58,400 loans, up 12% on April and 10% on May 2016.
Within this, first-time buyers borrowed £4.7bn, up 12% both on last month and on May 2016. They took out 29,200 loans, up 13% month-on-month and 8% year-on-year.
Home movers borrowed £6.2bn, up 11% on April and 22% year-on-year. This equated to 29,200 loans, up 11% month-on-month and 13% compared to a year ago.
Home-owner remortgage activity was up 10% by value and 9% by volume on April. Compared to a year ago, remortgage lending was up 12% by value and 7% by volume.
Gross buy-to-let totalled £2.9bn in May, up 16% on April and 12% compared to May last year. This equated to 19,100 loans, a 16% increase on April and 15% on a year ago.
Paul Smee, head of mortgages at UK Finance, said: “The apparent strong growth in mortgage lending in May might flatter to deceive. The relative weakness in lending last May following the stamp duty changes makes comparisons misleading. The seasonally adjusted data shows a less buoyant lending picture, with home buying activity remaining relatively unchanged month-on-month and remortgage lending gradually decreasing each month since January.
“In the summer months, we expect home buying activity to continue with an even split between first-time buyers and home movers but in greater numbers than in the winter months; we expect buy-to-let to remain subdued compared to its recent 2015 peak.”
On a seasonally adjusted basis, lending to first-time buyers and home movers declined by value and volume in May compared to April, but increased compared to a year ago. Buy-to-let and remortgage activity remained relatively unchanged in May from April.
The proportion of household income used to service capital and interest rates continued to be near historic lows in May for both first-time buyers and home movers at 17.3% and 17.5% respectively.
Affordability metrics for first-time buyers saw the typical loan size increase from £136,300 in April to £137,000 in May. The average household income decreased to £40,500 from £40,700. This meant the income multiple went up from 3.57 to 3.59.
The average amount borrowed by home movers in the UK increased to £177,000 from £176,500 the previous month, while the average home mover household income decreased month-on-month from £55,200 to £54,900. The income multiple for the average home mover went up to 3.38 from 3.35.
Buy-to-let activity was driven by remortgage lending which accounted for over two thirds of total lending. The number of loans for buy-to-let house purchase advanced in May remained low compared to activity seen before the change on stamp duty on second properties introduced in April last year.
Shaun Church, director at mortgage broker Private Finance, added: “Although lending picked up in May, the market remains subdued. The lack of available housing continues to limit lending volumes, and while supply-side issues persist we are unlikely to see a significant increase in lending. A sluggish remortgage market has also contributed to disappointing overall figures, with the CML reporting that on a seasonally adjusted basis lending for remortgage has fallen every month since January.
“There are some clear positives to be taken from these figures, however. Lending remains stable in spite of wider political and economic uncertainty, suggesting the market has robust foundations. Demand from buyers continues to be supported by low mortgage rates and a growing number of products.”