The latest Mortgage Trends Update from UK Finance indicates that the residential remortgaging market saw the strongest July for a decade, while the buy-to-let sector has plummeted.
In July, 46,900 new homeowner remortgages were completed, which is up by a substantial 23.1% on the same month last year. The £8.7 billion of remortgaging recorded in July was 26.1% higher on an annual basis.
At the same time, 32,600 new home mover mortgages were completed, some 3.8% fewer than in July 2017. This £7.3 billion of new lending was the same as last year. UK Finance found that the average home mover is 39-years-old and has a gross household income of £57,000.
31,400 new first time buyer mortgages were completed in July – 1% more year-on-year. By value, this £5.4 billion of new lending was 5.9% higher compared to last July. The average first time buyer is 30-years-old, with a gross household income of £42,000.
For buy-to-let, 5,500 new home purchase mortgages were completed in the month, which is down by a significant 14.1% on the same month in 2017. This £0.8 billion of lending was down by 11.1% on an annual basis.
14,700 new buy-to-let remortgages were completed in July – up by 7.3% yearly. By value, this £2.4 billion of new lending was up by 9.1% on July last year.
Jackie Bennett, the Director of Mortgages at UK Finance, comments on the data: “The residential remortgaging market saw its strongest July in over a decade, as homeowners pre-empted the latest Bank of England rate rise by locking into attractive fixed rate deals.
“There was also considerable growth in remortgaging in the buy-to-let sector, showing that, while recent tax and regulatory changes are impacting on new purchases, many existing landlords remain in the market.”
She adds: “The number of first time buyers has returned to modest year-on-year growth. However, affordability remains a challenge for many prospective borrowers, underlining the importance of clarity over the future of schemes such as Help to Buy.”
The Director of mortgage broker Private Finance, Shaun Church, also responds: “Homeowners have been quick off the mark in responding to the threat of rising interest rates, with remortgage activity surging in July. Locking into a fixed rate deal is the only way of guaranteeing immunity against rate rises and, while many expected lenders to start upping their fixed rates once the Bank of England’s decision was announced, they have remained mostly flat. This means there are plenty of competitive deals still available in the market for buyers to snap up.
“In today’s environment of gradually rising rates, longer-term fixes, such as ten-year deals, may well start to become more popular, particularly among cautious homeowners who wants to ensure their monthly outgoings hold steady for as long as possible.”
He concludes: “Remortgage activity appears to be the main thing keeping the buy-to-let market afloat. Though punitive regulatory changes have dissuaded new entrants to the market, today’s data suggests many existing landlords are staying put. With mortgage costs often being one of landlords’ biggest expenses, swapping to a lower-rate deal is a sensible strategy for making a rental property more profitable.”