Mortgage lending rose by 19% in March but is still almost a fifth lower than the same time last year, according to the latest figures.
The Council of Mortgage Lenders (CML) estimated gross mortgage lending reached £21.4 billion which was 19% higher than February’s lending total of £17.9 billion. However, this was still 19% lower than the £26.3 billion lent in March 2016.
The sharp fall in year-on-year borrowing was expected as buyers rushed to complete last year before the introduction of additional stamp duty in April. Although the figures cover all market lending – both domestic and expat – the outlook is still reasonable for expats looking to buy UK property as result of the continuing weak pound against the dollar and euro.
CML senior economist Mohammad Jamei said: “Mortgage lending appears to be in neutral gear. Our gross estimate for March is £21.4 billion and this is broadly in line with average monthly lending over the past year. Within this aggregate level, there has been a shift towards first-time buyer and remortgage customers, away from home movers and buy-to-let landlords.”
CML estimated gross mortgage lending for the first quarter of 2017 at £59.1 billion. This is a 4% decrease on the fourth quarter of last year and a 6% decrease on the £63.0 billion lent in the first quarter of 2016.
Mortgage rates remain low with some lenders offering rates of less than 1% as well as others increasing maximum lending amounts and raising mortgage age criteria. Yorkshire Building Society has recently launched a record low two-year variable mortgage at 0.89% and while Skipton International is offering a three-year discounted mortgage for expats starting at 2.99%.
Mr Jamei said the market favoured first-time buyers and those looking to remortgage and he didn’t expect the general election to have a huge effect.
He added: “We expect this profile to continue over the short-term, as low mortgage rates encourage existing borrowers to remortgage and government schemes help first-time buyers.”
There had been concern the drop in February would continue into March but this appears not to have been the case with borrowers continuing to take advantage of low rates, combined with modest average house rise increases. However, the outlook for April isn’t as glossy.
Henry Woodcock, principal mortgage consultant at IRESS, said: “In addition to the snap general election announcement, which may result in people delaying significant financial commitments in the short term, there are also a few other factors at play that might dampen mortgage activity.
“Although unemployment remains low at under 5%, inflation is starting to eat into wage growth and is above the government’s 2% inflation target.”
He added that with the prospect of a rise in the Bank of England base rate homebuyers might delay purchasing a new home until the long term economic picture was clearer.