According to the latest Council of Mortgage Lender’s (CML) report, momentum continues to build on housing activity levels, as transactions have now been above the 100,000 mark for the second month in a row.
Other report highlights included:
- Gross mortgage lending for February is £18.2 billion.
- Lending is increasingly being driven by remortgage activity
- The number of first-time buyers rose to over 340,000 in the 12 months to January, unmatched over any 12-month period since early 2008
Economic growth in the last quarter of 2016 was bumped up slightly to 0.7% and the economy unemployment rate fell to its lowest rate since early 2005.
However, average weekly earnings growth remains weak, with growth in wages falling to 2.2% in January.
Consumer price inflation reached 2.3% in February, exceeding the Bank’s target for the first time in over three years.
The CML reported: “With wage growth likely to remain weak, real wages will stagnate for much of this year, bearing down on spending. An early sign of this is that retail sales have now contracted for the third month in a row.
“The Bank expects inflation to reach 2.7% by 2018, but signalled it is willing to look past this, as it believes raising interest rates to counter inflation would come at the expense of higher unemployment and weaker income growth.”
The market is getting back to the levels seen at the start of 2016, with house purchase approvals reaching 70,000 in January. This recent acceleration in approvals has seen transactions topping the 100,000 mark for the second month in a row.
Housing transactions are predominantly led by first-time buyers, with home-movers and buy-to-let house purchases both down annually.
CML reported: “Our estimate of lending in February comes in at £21.5 billion, on a seasonally adjusted basis, which marks a second breakout from the narrow tramlines it has been on for the past nine months. On an unadjusted basis, lending was £18.2 billion.”
Competition between lenders continues to keep rates low, with an average of 1.42% at 75% loan-to-value. This is bolstering a recovery in remortgage activity, with growth at 20%, year-on-year.
Government housing schemes have predominantly been aimed at first-time buyers, which has led to momentum building slowly. In the 12 months to January, there were 340,200 first-time buyers, the highest level of any 12-month period since early 2008.
However, the home-mover market is still subdued at around 360,000 on a 12-month rolling basis.
Finally, buy-to-let house purchases remain sharply down according to CML, stating that their forecast was an average of just over 7,000 house purchases a month, in 2017 – the year started with just 5,900.
Henry Knight, Managing Director, Springtide Capital commented: “We anticipated the downturn in buy-to-let purchases, with the new stamp duty dampening the attractiveness of becoming a landlord. However, there will always be a place for properties to let, whether it’s due to poor credit stopping a person from purchasing a house, work re-location, availability or affordability. It’s positive to see that housing transactions are increasing; however, the imbalance of supply and demand remains.”
For more information and advice on buy-to-let mortgages, please call 020 3040 4400 or visit our website.