Homebuyer borrowing up in May

New data from UK Finance has revealed that homebuyers arranged 58,400 loans worth £10.8bn in May.

Homebuyer borrowing also increased 16% in value and 10% in volume in May 2017 compared with May 2016.

All the measured areas of the market experienced growth in the May figures:

• first-time buyer – borrowing: £4.7bn up 12% both month-on-month and year-on-year; loans: 29,200 up 13% month-on-month and 8% year-on-year
• home mover – borrowing: £6.2bn up 11% month-on-month and 22% year-on-year, loans: 29,200 up 11% month-on-month and 13% year-on-year
• remortgage – activity was up 10% by value and 9% by volume month-on-month; lending was up 12% by value and 7% by volume year-on-year
• buy-to-let – gross total: £2.9bn up 16% month-on-month and 12% year-on-year; loans: 19,100 up 16% month-on-month and 15% year-on-year.

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.

“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.”

The typical loan size for first-time buyers increased from £136,300 in April to £137,000 in May, while the average amount borrowed by home movers increased to £177,000 from £176,500.

Jonathan Sealey, CEO of Hope Capital, said: “UK Finance recently cut the buy-to-let lending forecasts amid a ‘stalled’ mortgage market.

“This highlights how damage has been inflicted on the buy-to-let market thanks to the changes in stamp duty, the phasing out of interest rate tax relief, and the lack of new homes coming on to the market hasn’t helped in terms of home mover activity.

“However, first-time buyers are once again fuelling the market, borrowing £4.7bn – up on last month and May 2016 – suggesting that more of these borrowers are taking full advantage of the competitive rates.

“Therefore, amid the low interest environment, it seems that borrowing continues to remain attractive to many, particularly those looking to take their first steps on to the property ladder, and it is these buyers who will help to keep the market buoyant.”

UK Finance is a new organisation which is the result of a merger between six trade associations, including the Council of Mortgage Lenders.