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Mortgage Lending Remains Relatively Subdued

Finance and banking trade association, UK Finance, recently published figures giving an update on levels of activity within the mortgage market in the UK.

According to the figures, March 2018 saw a small increase in lending to first-time buyers compared to a year earlier, while remortgaging levels softened slightly after a busy start to the year.

Mortgage Lending Breakdown

Looking at the figures in more detail, they show that:

  • There was £5.1bn of new lending to first-time buyers in the month, up 2% year-on-year. Around 31,200 new first-time buyer mortgages were completed in the month, some 1.9% fewer than in the same month a year earlier. The average first-time buyer is 30 and has a gross household income of £42,000.
  • There was £6.1bn of new lending to homemovers in the month, 4.7% down year-on-year. There were 28,400 new homemover mortgages completed in the month, some 7.8% fewer than in the same month a year earlier. The average homemover is 39 and has a gross household income of £56,000.
  • The £5.6bn of remortgaging in the month was 9.7% down year-on-year. There were 32,400 new homeowner remortgages completed in the month, some 12% fewer than in the same month a year earlier.

In addition, there were 5,500 new buy-to-let home purchase mortgages completed in the month, some 19.1% fewer than in the same month a year earlier. UK Finance research suggests the recent softening of the buy-to-let market is mostly down to a number of recent tax and regulatory changes including the limiting of landlords’ Mortgage Interest Tax Relief, land tax surcharges and new underwriting requirements introduced by the Prudential Regulatory Authority.

Interest-Only Mortgages

In a separate update, UK Finance has revealed that the number of interest-only mortgages has almost halved in the past six years.

Its figures suggest that there are currently 1.7 million outstanding interest-only mortgages (including partial interest-only), which is a reduction of 46% since 2012, when this data was first collected. The total value of the interest-only mortgage book is £250 billion, down 37% in the same period.

According to UK Finance, out of the one million interest-only loans due to mature by 2020 that were live at the end of 2012, only around 200,000 now remain. It notes that making contact with some borrowers remains a challenge, but adds that there is evidence that lenders are seeing greater success here, and the vast majority of borrowers who do engage have repayment plans in place.

Ensuring Viable Repayment Plans are In Place

“The number of outstanding interest-only loans has halved in the past six years, with a particularly steep decline in higher loan-to-value mortgages,” commented Jackie Bennett, Director of Mortgages at UK Finance.

“Many borrowers continue to redeem ahead of schedule or switch to a repayment mortgage,” she said. “However, there remains plenty more work to do over the coming years to ensure that those remaining borrowers who have so far been reluctant to engage have viable repayment plans in place.”

“We continue to encourage all borrowers with interest-only mortgages to contact their lender as soon as possible, as the sooner they do so the more options will be available,” she added. “UK Finance will also be developing new best practice for lenders in this area, to reflect the changing regulatory landscape and help the industry engage successfully with more borrowers.”

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