One of the great barometers of the economic climate is the housing market, and perhaps more importantly, the lending that accompanies that. With lending to home buyers appearing to be on the increase, how bright does the future look?
The start of 2017 has seen a gradual increase in mortgage lending, and first-time buyers appear to be benefiting from this. Activity on remortgaging also looks to be up on this time last year. However, buy-to-let lending is in a less positive state, with both the number of loans and their value continuing to decrease.
Generally, seasonal factors keep the property market quiet during the winter months, but recently first-time buyer and home-mover activity have both increased in value. More loans have been borrowed than any time in the last decade, which is largely boosted by the activities of first-time buyers.
These debutants to the property market are now unusually matching home-mover borrowing. The amount of household income used to assist in dealing with capital and interest rates continues to be at an all-time low, and first-time buyers have seen their typical loan size start to decrease.
Home-movers have seen a slight increase in income, which may go some way to explaining the month-on-month increase in the amount they borrowed.
Remortgaging levels are also growing, with low wage growth and inflation being a contributing factor to this. However, this remains an unpredictable market, and Brexit uncertainty means many are waiting for the negotiation outcome before they make a decision on remortgaging their property.
Apparently, the weaker side of the lending market is that of buy-to-let mortgages, a trend which may be set to continue due to tax changes and mandated stress tests. The main buy-to-let activity has been driven by remortgage lending, although the number of loans appears to be down.
One explanation for this downturn in buy-to-let borrowing may be more to do with a rush of investors this time last year, who raced to buy before the stamp duty increase. This anomaly has now skewed the 2017 figures somewhat, and when combined with fears over added taxation for these mortgages, it would explain the change in the buy-to-let climate.
Taking a step back from the most recent figures shows that buy-to-let borrowing has actually stood up well to the challenges of Brexit, as lending in this area has appeared to stabilise.
Buy-to-let properties still present good and balanced investment opportunities, despite the changes they are now facing. A period of adjustment for landlords will be necessary but there are still strong returns available.
Whilst house prices continue to grow, this growth has slowed and this may have fuelled the increase in first-time buyer activity. While interest rates remain low, borrowers are taking advantage while they can, especially with the uncertain future of Brexit looming.