UK mortgage market slows in June as uncertainty bites
TAKE-UP of first-time buyer and buy-to-let mortgages slowed in June as economic and political uncertainty caused some UK borrowers to take a ‘wait and see’ approach.
June saw a 1.5 per cent drop in first-time buyer mortgages and a 3.6 per cent drop in homemover mortgages against the same time last year, according to figures from trade body UK Finance.
The market continued to cool after the month already saw a reduction in residential mortgage lending off the back of poor consumer confidence and subdued house prices.
The figures also showed an 8.3 per cent growth in remortgages with an average additional amount borrowed of £56,100.
This was driven by a slight drop in the number of fixed-rate mortgages coming to an end and the growing popularity of product transfers.
“Remortgaging continues to be an attractive option for homeowners,” said Dave Harris, chief executive of equity release lender More2Life.
“With the current economic and political uncertainty, some borrowers are adopting a ‘wait and see’ approach to buying and selling, so remortgaging to improve an existing property is becoming increasingly popular.”
Harris also said that equity release is becoming increasingly popular amongst older homeowners who want to adapt their existing homes to suit their changing circumstances during later life.
“With more homeowners considering equity release as a way of enhancing and adding value to their home, advisers will be key in pointing them in the right direction and providing them with the best solution for their particular needs,” Harris added.
Read more: Residential mortgage lending slows in May
Although market fundamentals remain strong, according to Rob Barnard, sales director at Masthaven Bank, the upward trend in remortgaging is a sign of the caution many feel towards the housing market during this period of political turbulence.
“Despite this uncertainty, the first-time buyer market remains largely unaffected showing only a small decrease over the month,” Barnard said.
“Whether this can be attributed to government initiatives such as the Help to Buy scheme, the ‘gifting’ of wealth from parents to children, or the rise in competitive products offered by lenders, it is clear that the market fundamentals remain strong.”
But with the end of the Help to Buy scheme in 2023 and continuing political upset in the UK, there is an onus on the market to innovate, according to Barnard.
“With the end of the Help to Buy Scheme in 2023 and no signs of the end of the current political disruption, there is an onus on the market to offer increased product innovation and incentives to encourage would-be buyers to take the next steps onto, or up, the property ladder.”
The buy-to-let market also saw a slowdown with 3.6 per cent fewer purchase mortgages and an 0.8 per cent drop in remortgages compared with last year.
David Copland, director of mortgage services at TMA, thinks that the second half of the year could provide a big opportunity for lenders and advisers as a number of deals are expected to come to the end of their terms.
“£90.2bn worth of residential mortgages and almost £8.3bn worth of buy-to-let deals will come to the end of their terms between June and October this year,” said Copland.
“This represents a huge opportunity for advisers to talk to their customers about remortgaging, and to help them lock in the best deals available to them. As more brokers work to secure the best possible outcomes for their clients, there’s no reason why today’s remortgage numbers can’t continue to rise as we look ahead to the rest of the year.”