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‘Modest momentum’ returns to the housing market amid record low mortgage rates

The housing market has built up “modest momentum” this year but to different types of borrower, mortgage lenders claim.

Figures from trade body UK Finance show there were 41,584 house purchase approvals in September, stronger than the monthly average of 41,006 over the previous six months and 7% up the same month last year.

Gross mortgage lending was estimated to have hit £21.4bn in September, up 5% annually.

Analysis by the trade body claims there has been little movement in transactions but the mix has changed due to low mortgage rates helping first-time buyers and home movers, and the proportion of lending to landlords dropping.

The UK Finance report said: “Before March 2016, when the Stamp Duty change on second properties led to a jump in activity, roughly one in ten transactions were by landlords, but in August this year the comparable figure was closer to one in 17.

“Over the same period, first-time buyers have fared better, accounting for a larger proportion of house purchases, helped by Government schemes such as the Help to Buy equity loan.

“Home movers and cash buyers have seen less movement as their share of the market remains unchanged. More recently, though, home mover numbers have shown some signs of growth, helped by low mortgage rates as their debt service costs reach historic lows.

“Another factor that may have helped home movers is the change to the Prudential Regulation Authority’s macro-prudential policy on loan-to-incomes. This allows lenders to more effectively manage the flow of loans at high income multiples and has coincided with the proportion of home mover loans at or above 4.5 loan-to-income ratio to overtake that of first-time buyers.”

Mohammad Jamei, senior economist for UK Finance, added: “As we near the end of 2017, our data is showing that housing market activity has built up modest momentum since the start of the year, helped by an increase in first-time buyer numbers.”