UK Finance figures show that homebuyer borrowing climbed by 10% on April and 16% on May last year, while homemover borrowing saw an 11% increase on the month before and 22% year-on-year.
Mortgage lending rebounded in May but the results may flatter to deceive, said Paul Smee, head of mortgages at UK Finance.
UK Finance (formerly CML) figures show that homebuyer borrowing climbed by 10% on April and 16% on May last year, while buy-to-let lending rose by 16% from the month before and 12% year-on-year.
But Paul Smee (pictured), head of mortgages at UK Finance, said: “The apparent strong growth in mortgage lending in May might flatter to deceive.
“The relative weakness in lending last May following the stamp duty changes makes comparisons misleading.
“The seasonally adjusted data shows a less buoyant lending picture, with homebuying activity remaining relatively unchanged month-on-month and remortgage lending gradually decreasing each month since January.
“In the summer months, we expect homebuying activity to continue with an even split between first-time buyers and homemovers but in greater numbers than in the winter months; we expect buy-to-let to remain subdued compared to its recent 2015 peak.”
John Phillips, group operations director at Just Mortgages and Spicerhaart, agreed with Smee.
He said: “At first glance it seems that the market picked up slightly, but we cannot make a fair comparison as the figures are still very much distorted by the buy-to-let stamp duty changes that were introduced in April last year.
“However, the interest rate hike is building and lenders have warned that rates may not go any lower.
“Therefore, with many homeowners now facing the end of the low interest golden age, it’s possible that more borrowers will take advantage of the low interest environment while they can.”
Other areas of lending also experienced an uptick.
Homemover borrowing saw an 11% increase on the month before and 22% year-on-year.
First-time buyer borrowing rose by 12% month-on-month and year-on-year.
And remortgage lending rose by 10% from April 2017 and 12% from May 2016.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘It is steady as she goes for the mortgage market with no real uptick in lending in May.
“Buy-to-let remains subdued but there is no real surprise there as landlords get to grips with tougher mortgage criteria, higher stamp duty and less favourable tax breaks.
“It is a surprise that more people aren’t remortgaging, given the low rates available but it is often the case that borrowers aren’t motivated to remortgage until rates are actually rising - by which point they have missed the cheapest deals.”
Jonathan Sealey, chief executive of Hope Capital, said: “UK Finance recently cut the buy-to-let lending forecasts amid a ‘stalled’ mortgage market.
“This highlights how damage has been inflicted on the buy-to-let market thanks to the changes in stamp duty, the phasing out of interest rate tax relief, and the lack of new homes coming to the market hasn’t helped in terms of home mover activity.
“However, first-time buyers are once again fuelling the market, borrowing £4.7bn, up on last month and May 2016, suggesting that more of these borrowers are taking full advantage of the competitive rates.
“Therefore, amid the low interest environment, it seems that borrowing continues to remain attractive to many, particularly those looking to take their first steps onto the property ladder, and it is these buyers who will help to keep the market buoyant.”
