First-time buyers borrowed £5.5bn in June, according to the monthly lending trends survey published by the Council of Mortgage Lenders.
The figures show an increase of 25% on June last year equating to 34,300 loans, up 24% month-on-month and 17% year-on-year.
The data also shows an increase in remortgage activity to £5.6bn, up 8% on May and 6% compared to a year ago.
Landlords borrowed £2.9bn, up 12% month-on-month but down 15% year-on-year.
In total, the survey shows first-time buyers borrowed £13.7bn, equating to 87,100 loans – an increase of 14% compared to 2015.
Paul Smee, director general of the CML, said: “These figures reveal growth in house purchase activity and in particular for first-time buyers. As ever, there is uncertainty and it will take more time and patience to understand how the market will evolve in the current environment – these figures predominantly cover activity in the run-up to the referendum.
“We still believe that the mortgage market is well capitalised, resilient and open for business, and will remain so for the foreseeable future.
“First-time buyers are continuing to drive house purchase lending, outperforming home movers for the third month running. More loans were advanced to them in June than at anytime since August 2007.
“Buy-to-let house purchase activity remains lower than before the stamp duty changes at the beginning of April, but showed a large month-on-month increase. As might be expected, buy-to-let remortgage seems to have been less affected by the changes and remains consistent with lending last year.”
Affordability metrics for first-time buyers have remained relatively stable, with borrowers’ average household income increasing slightly from £40,000 in May to £40,377 in June.
Home movers showed a similar trend with the average amount borrowed increasing to £171,000 from £166,000 in May, and the average household income of a home mover also increasing to £54,700 from £53,300. This meant the income multiple went down from 3.25 to 3.26 month-on-month.
Remortgage lending saw a month-on-month increase in May but a year-on-year decrease by volume.
Richard Pike, sales and marketing director at Phoebus software, suggested the results show first-time buyers may take up slack in the market: “The mortgage market was in good shape before the EU referendum having bounced back from the initial hit following stamp duty changes for buy-to-let in April, and first time buyers took up the slack as landlords held back.
“As we move forward in what is undeniably a more unpredictable economic future it is difficult to foresee the next few months showing the same levels. However, with the cut in interest rates, and Mark Carney’s implicit direction to lenders to pass on the reduction, we may yet see consumers tempted into the market; for first time buyers the cut has made affordability less of a challenge and for those with capital property could be a way to reap higher rewards than other forms of investment.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, agreed that first-time buyers would move to take up low interest rates: “June’s lending figures show a robust market with a good representation of first-time buyers. What we are seeing post-referendum is lenders keen to lend, resulting in some very attractive mortgage rates. Despite last week’s base rate reduction already being factored into the pricing of many mortgage deals, falling Swap rates have since enabled some lenders to cut rates further. For example, Nationwide has reduced its new fixed rates by up to 20 basis points this week, including launching its cheapest ever ten-year fix pegged at just 2.79 per cent.
“Buy-to-let lending fell considerably in the second quarter, which was entirely as expected with landlords bringing forward buying decisions to the first quarter of the year.”
However, Jeremy Leaf, north London estate agent and a former RICS residential chairman, sounded a note of caution, warning of continued uncertainty: “Although these figures are a little historic reflecting the mood music prior to the referendum, they do show that the former Chancellor’s aspiration to level the playing field between first-time buyers and buy-to-let investors has borne fruit as they take advantage of record low mortgage rates.
“However, since the referendum we have found that the softening in prices and general uncertainty has encouraged more landlords back into the market so it remains to be seen whether first-time buyers can still compete.”
John Phillips, SpicerHaart and Just Mortgages group operations director said: “The increase in first-time buyers in June may show that the Chancellor’s plans, in squeezing the buy-to-let market, were having an effect before the referendum.
“Further cuts predicted in the last 24-hours by past and present members of the MPC could also give more impetus. Lenders have been quick to pass on the cut this time, and with their own lending targets to meet they will do what they can to convince buyers and remortgagors into the market. The question now has to be ‘how low can you go?’”