"First-time buyers are taking advantage of a level playing field now"
According to the report, this is due to strong first-time buyer activity which has" consistently matched home mover borrowing over the past six months, a trend not seen in the UK for 20 years".
However, due to the seasonal dip in activity, borrowing was relatively low compared to monthly activity the past twelve months. On a non-seasonally adjusted basis, home buyers borrowed £8.9bn, up 6% on January and 2% on February 2016.
The report also highlighted that homeowner remortgage activity fell by 26% by value and 23% by volume compared to January.
Looking on a seasonally adjusted basis, first-time buyer and home mover activity increased by value month-on-month and year-on-year. Buy-to-let house purchase and remortgage activity remained unchanged by volume and by value month-on-month, but decreased compared to February last year 44% by value and 42% by volume.
Paul Smee, director general of the CML, said: "Seasonal factors traditionally keep the market quieter in winter months, but 2017 began relatively strong on the house purchase side. Borrowers took out more loans to purchase a home in the first two months of 2017 than any year since 2007. This is down to strong first-time buyer activity which has consistently matched home mover borrowing over the past six months, a trend not seen in the UK for 20 years.
This trend is expected to continue because of the tax changes from April and because lenders are tightening affordability criteria in response to PRA-mandated stress tests."
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "The interesting point about these figures is that the market seems to be holding up quite well; in other words, prices are not dropping dramatically but are still being underpinned by a shortage of stock. Transactions are continuing and buyers and sellers are in the market trying to do business, even though some of these numbers are relatively historic.
In the build up to Easter, although quite a few people are away we are still finding on the high street that buyers and sellers are prepared to do business but are still negotiating very hard.
The encouraging point about the CML report is the improvement in first-time buyer lending. This underlines what we are finding in our offices - that first-time buyers are taking advantage of a level playing field now that so many buy-to-let investors are choosing not to add to their portfolios but rather, are staying put and even selling in some cases.
First-time buyers are the lifeblood of the market - we need to support them even more to ensure activity is maintained over what is bound to be a tricky period for buyers and sellers over the next few months."
Jeremy Duncombe, Director, Legal & General Mortgage Club, commented: “Today’s CML figures show that demand for lending, particularly to first time-buyers, remains strong. As the market continues to grow, new borrowers are benefiting from historically low mortgage rates, which are helping an increasing number of people take their first steps onto the property ladder. Despite a monthly fall, remortgaging activity remains up annually as some homeowners use this opportunity to save money and switch to a more competitive deal.
It is unsurprising that buy-to-let borrowing has weakened year-on-year. With the layering of several control measures and the recent tax changes coming into force, we have seen fewer landlords enter the market, and purchase business has suffered. The shape of the buy to let market is changing, and the outcome of all the changes could impact tenants as rents increase and some stock is sold to counter the increasing burden on landlords.”
Ishaan Malhi, CEO and founder of online mortgage broker Trussle, had this to say: “After a fairly flat start to the year, the market is starting to look livelier. A surge in first-time buyer activity will be fuelled by many who will be looking to take advantage of the momentary slowdown in house price growth. Meanwhile remortgaging activity has fallen slightly from the very high level we saw in January, but is still 9% higher in volume than February 2016.
It seems that many existing borrowers are taking advantage of low interest rates to secure a better deal on their repayments - a saving that could make a real difference to households at a time of low wage growth and rising inflation.
Until the Bank of England does finally announce a rate rise, I expect to see remortgaging levels continue to rise year-on-year. Not only are there are around three million borrowers in the UK paying their lender’s higher Standard Variable Rate who could save an average of £3,500 a year by remortgaging, but thanks to technology, the switching process has become far simpler and more convenient for these people to do so.”
