Research Reveals Mortgage Lending Trends

The Council of Mortgage Lenders recently published a breakdown of house purchase lending in Scotland during the first quarter of 2015.

The figures show that, on an unadjusted basis:

• Home-owners borrowed £1.8bn for house purchase, down 22% quarter-on-quarter but up 1% year-on-year. They took out 13,500 loans, down 22% on the previous quarter but up 7% compared to the first quarter 2015.
• First-time buyers borrowed £660m, down 24% on the fourth quarter 2015 but up 10% on the first quarter last year. This totalled 6,200 loans, down 23% quarter-on-quarter but up 11% year-on-year.
• Home movers borrowed £1.1bn, down 21% quarter-on-quarter and down 4% compared to a year ago. This totalled 7,300 loans, down 22% quarter-on-quarter but up 4% on quarter one 2015.
• Re-mortgage activity totalled £780m, down 1% on the fourth quarter 2015 but up 13% compared to a year ago. This came to 6,400 loans, down 5% quarter-on-quarter but 5% up compared to a year ago.

“Seasonal factors often affect lending levels in the first quarter of the year, but there are encouraging indicators in Scotland, as all lending types showed growth year-on-year,” commented Carol Anderson, CML Scotland chair. “2016 saw the strongest first quarter in a year for house purchase lending since 2008 and, with affordability conditions continuing to be favourable, we would expect gradual year-on-year growth in Scotland to continue throughout 2016.”

Another interesting trend recently identified in house purchase lending is the increased availability of building society mortgages to older borrowers.

According to a recent report by the Building Societies Association (BSA), more than half of building societies in the UK will now lend to borrowers up to or over the age of 80. These findings come seven months after the BSA published a report on the issues being faced by borrowers in their forties and fifties onwards.

The latest research shows that:

• 27 building societies, which hold £200bn of mortgage assets between them, will now lend up to 80, 85 or have no maximum age limit.
• 6 societies will now lend up to age 80; 10 societies will lend up to 85 and a further 11 have no maximum age limit and manually underwrite each case.

These changes are also starting to help parents and grandparents who want to act as a guarantor for their children or grandchildren if they struggle to get onto the housing ladder alone, the BSA says.

“Since November there has been a marked shift towards increased flexibility for older borrowers,” explained Paul Broadhead, Head of Mortgage Policy at the BSA. “This is coupled with a better understanding and careful management of the different risks that apply to this type of lending.” 

“I am pleased to see building societies leading the charge,” he added. “We are seeing innovation in the approach to underwriting and the development of processes better tailored to the specific circumstances of older borrowers.”

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