First-time buyer lending increased by 23% year-on-year and 10% from the month before to reach £4.3bn in May 2016, figures from the Council of Mortgage Lenders have revealed.
Remortgage lending also rose by 30% year-on-year to reach £5.2bn in May, though it fell by 15% on April.
Homemovers and landlords both saw lending drop by 2% and 4% year-on-year, though they rose by 19% and 4% from the month before.
Paul Smee (pictured), director general of the CML, said: “There was a sense of the market regaining some equilibrium in May, following the stamp duty driven spike in March and the subsequent dip in April.
“For the second month running, first-time buyers borrowed more than homemovers, the first time in 20 years that this has been the case. Buy-to-let continues at lower levels as expected, after the change to stamp duty.
“Brexit, and its likely effect on the market, is a question to which the answer will not immediately be forthcoming. Lenders will continue to be open for business as usual, but lending volumes may be affected by uncertain consumer sentiment.”
Andy Knee, chief executive of LMS, said: “The mortgage market in May appeared confident, with the value of borrowing up year-on-year for home-owners, first-time buyers and remortgagors. Just buy-to-let lending was down when compared to May 2015, hampered by the change to Stamp Duty.
“The surprise result in the UK vote to leave the EU does mean a certain volatility in the housing market will ensue in the coming months and it is not yet clear exactly how this will play out, but we’re seeing little evidence anecdotally of purchases or transactions falling through.
“The Bank of England looks likely to lower the base rate to a new historic low of 0.25%, which could ensure competitive mortgage rates continue to be offered, presenting an opportunity for existing homeowners to remortgage and reduce their outgoings. However, this is not all good news as lender appetite for risk will be lower in the current economic climate, which could hamper chances for some first-time buyers.”
Ian Larkin, co-group chief executive of Target Group, said: “It’s pleasing to see that the market regained some balance in May as the huge spike in lending driven by buy-to-let activity in March and the subsequent dip in April has evened out to a steady 8% growth year on year. It seems this has been driven largely by lending to first-time-buyers.
“While this is clearly positive news, the really pressing question for lenders now is what next following the Brexit vote? The market is not likely to see double digit growth in the near future following the unprecedented uncertainty unleashed by the vote to leave the EU and the economic headwinds that seem likely to emerge.”
“Added to this, all indications are Mark Carney and the Bank of England will cut interest rates imminently and so margins for lenders will be squeezed even lower at a time when rates are already close to rock bottom and competition is intensifying between traditional lenders, challenger banks, specialist lenders and alternative finance providers.
“In this uncertain and intensely competitive marketplace, lenders will need to work even harder to source and keep the right kinds of borrowers, and as a result, service and cost efficiency will be key to ensuring growth continues.
“Equally, I expect many lenders to look to their existing customers and potential re-financing opportunities to try to keep lending volumes closer to the targets they will have forecast at the beginning of the year. A move that will make a customer-centric approach and better customer information even more crucial.”
Richard Pike, Phoebus Software sales and marketing director, said: “Looking back at the lending figures for May shows that, as we headed towards the EU Referendum, the housing market was overall healthier than it was a year ago.
“Remortgage activity showed healthy increases on 2015 as borrowers continue to take advantage of low rates.
“Whilst the number of first time buyers entering the market increased especially, which seems to show that the Chancellor’s plans were starting to bear fruit. However, as we turn the corner into a more unsettled period it is anyone’s guess how the market will fare in the second half of the year.”
He added: “Construction, which was showing positive signs before the vote to leave the EU is likely to be affected as the pound weakens, which could have a more long term effect on the amount of affordable housing coming onto the market. Effectively putting a lid on further growth within the FTB sphere.
“There is also speculation regarding house prices, will they fall? Or will overseas investors, seeing the opportunity of more bang for their buck, increase demand and push prices up further?
“As always only time will tell, but we are certainly in for a changeable few months, especially given the political events of the past two weeks.
“What we need is stability, so it will be very interesting to see how the Bank of England plans to help steady the ship”