No Red Flags for UK housing market in June

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1 1 National Mortgage Index Under embargo until 00:01 hrs on July 2017 Reporting on June 2017 data National Mortgage Index Brian Murphy Head of Lending Mortgage Advice Bureau No Red Flags for UK housing market in June Whilst some commentators had suggested that the UK housing market would see a slow-down in June due to the Election, now data from last month is available we ve observed that in reality, the UK housing market remained solid with very little change on the previous month. Reviewing data from June we can see little movement in key indicators such as: Average purchase price remained broadly unchanged with a 0.4% increase month on month Minimal change in the average remortgage loan with 0.8% increase month on month Average First Time Buyer property purchase price was mostly unchanged on with 0.8% increase Mortgage Advice Bureau data is based on written business, e.g. mortgage applications submitted to lenders, therefore this provides a good snapshot of consumer confidence and activity both pre and post Election. What we ve observed from the data for June is that the market held up well and mostly showed no sign of a slow-down in terms of consumer appetite for mortgages, either to purchase or to remortgage. Clearly, consumers are making decisions based on their individual circumstances and generally seem to not to be taking any notice of what goes on in the headlines, or at least taking them with a hearty pinch of salt. The reality is, for most of those moving currently, it s not a discretionary decision; there are lifestyle drivers which are forcing them to move, for example a growing family or a need to relocate to get children into a certain school or due to a new job. In these circumstances, regardless of political or economic climate there is a need to move home, and that is driving activity, rather than a sentiment-based market which we ve seen in previous years where buying decisions are fuelled by a desire to not miss out if house prices are on the increase. It s a very different buying process now, and those who are currently transacting are, in the main, motivated due to circumstance and not speculation. Market fundamentals such as the ongoing imbalance of stock versus demand in many areas of the country, together with mortgage rates at or close to historic lows, have meant that what could have been a fallow month for UK property was actually one of the busiest months of the year so far a fact borne out by the number of residential property transactions in June as noted by HMRC. Granted, whilst the majority of these deals will have been started before the start of the month, doubtless most would have been instigated post the Election being called on 18th April, which further evidences the fact that UK consumers are apathetic to political conjecture because, frankly, it makes little difference in reality to their day to day decision making process. Of course, the full impact of the Election and its outcome won t be known until later this year, once we have data on transactions that were started from 9th June onwards. There are some signs of softening home mover activity, however, in terms of the levels of people who ve applied for a mortgage since the election, either in terms of buying a home or remortgaging an existing one, the immediate evidence points to current market momentum being maintained, which is encouraging in terms of the start to the second half of 2017.

2 2 Average purchase loan 175,151 in June, 0.2% higher than in May ( 174,852) and slightly higher than in June 16 when the average loan was 174,960. < > Amount of purchase applicants who opted for fixed rate products In June 17, 96% of borrowers fixed their mortgage, unchanged on and a slight increase on June 16 (95%). Typical LTVs Remain unchanged month on month at 70%, and also unchanged year on year from 70% in June 16. Average applicant age 36 years old, unchanged month on month and and unchanged year on year. 43 yrs Remortgage 45 yrs Buy-To-Let 31 yrs First Time Buyer Change in the average purchase price Up slightly in June 17 to 250,216 from 249,317 in, a month on month increase of 0.4%. Change in average purchase salaries 35,983 in June 17, a slight decrease on ( 36,447) of 1.27% and slightly lower than 37,252 in June 16.

3 3 Remortgage Average remortgage loan 175,265 in June 17, an increase of 0.8% on ( 173,955) and a decrease on June 16 ( 178,870). < > Amount of remortgage applicants who opted for fixed rate products In June 17, 94% of borrowers fixed their mortgage, unchanged month on month and up 4.3% on June 16 (91%). Typical LTVs Decreased in June 17 to 54.2% from 54.3% in, and decreased by 2.8% on June 17 (55.8%). Average applicant age 43 years in June 17, up slightly on (42) and on June 16 (42). 45 yrs Buy-To-Let 36 yrs 31 yrs First Time Buyer Change in the average remortgage property value Up slightly to 323,395 in June 17 from 320,574 in, and an increase of 0.8% on June 17 ( 320,808). Change in average remortgage salaries Slightly higher in June 17 ( 42,714) than in ( 42,653) and broadly unchanged on June 17 ( 42,703).

4 4 Buy-To-Let Average BTL purchase loan 131,349 in June 17, 1.1% higher than ( 129,815) and 7.5% lower than in June 16 ( 142,024). < > Amount of BTL purchase applicants who opted for fixed rate products In June 17, 96% of BTL borrowers fixed their mortgage, up on (95%) compared with 90% of BTL borrowers who fixed their mortgage in June 16. Typical LTVs In June 17, the average BTL purchase LTV was 68%, unchanged month on month and year on year. Average applicant age 45 in June 17, unchanged month on month and one year younger than June 16 (46). 43 yrs Remortgage 36 yrs 31 yrs First Time Buyer Change in average BTL purchase price Up to 193,120 in June 17 from 190,950 in, and reduced year on year from 209,868, an annual decrease of 7.9%. Change in average BTL purchase salaries Down in June 17 to 38,829 from 40,913 in, and also down from June 16 ( 39,164).

5 5 First Time Buyers Average FTB purchase loan Up 0.2% in June 17 to 155,751 from 155,435 in. < > Amount of FTB purchase applicants who opted for fixed rate products The amount of First Time Buyers who fixed their mortgage remained unchanged month on month in June 17 (98%). Typical LTVs Remained unchanged month on month in June 17 at 74%. Average applicant age 31 in June 17, unchanged on. 45 yrs Buy-To-Let 43 yrs Remortgage 36 yrs Change in the average FTB purchase price Up from 209,893 in to 210,533 in June 17, an increase of 0.3%. Change in average FTB purchase salaries Up from 30,949 in to 31,174 in June 17, an increase of 0.7%. NB: Figures are based on May 2017 and June 2017 data

6 6 Regional Loan Analysis Increase from previous month Decrease from previous month NORTH WEST Av. Loan 128,608 Av. Loan 129,217 Monthly Change -0.5% Av. Loan 125,541 Annual Change 2.4% WEST MIDLANDS Av. Loan 173,187 Av. Loan 170,777 Monthly Change 1.4% Av. Loan 162,944 Annual Change 5.0% WALES Av. Loan 123,254 Av. Loan 125,113 Monthly Change -1.5% Av. Loan 124,035 Annual Change -0.6% NORTH EAST Av. Loan 127,182 Av. Loan 128,907 Monthly Change -1.3% Av. Loan 116,698 Annual Change 7.1% SCOTLAND Av. Loan 148,757 Av. Loan 146,941 Monthly Change 1.2% Av. Loan 147,088 Annual Change 1.1% YORKS & HUMBER Av. Loan 146,875 Av. Loan 144,552 Monthly Change 1.6% Av. Loan 141,075 Annual Change 4.1% EAST MIDLANDS Av. Loan 140,324 Av. Loan 140,061 Monthly Change 0.2% Av. Loan 131,232 Annual Change 6.9% EAST of ENGLAND Av. Loan 165,778 Av. Loan 157,852 Monthly Change 5.02% Av. Loan 145,305 Annual Change 14.1% SOUTH WEST Av. Loan 165,251 Av. Loan 166,108 Monthly Change -0.5% Av. Loan 169,808 Annual Change -2.7% SOUTH EAST Av. Loan 227,497 Av. Loan 227,438 Monthly Change 0.0% Av. Loan 230,119 Annual Change -1.1% GTR LONDON Av. Loan 357,955 Av. Loan 364,969 Monthly Change -1.92% Av. Loan 338,882 Annual Change 5.6%

7 7 Regional Market Commentary Mortgage Advice Bureau advisers from around the UK give their views... Rachel Geddes - London June was a very mixed picture in London; some clients preferred to defer any decisions until after the Election and didn t really start to engage with their transaction until much later in the month. Others, particularly First Time Buyers and also home movers looking to purchase at up to 1m were very active from the start of June, and weren t bothered in the slightest by what was going on in the news. We observed that last month was very much a buyer s market in London, which has led to many home movers we dealt with deciding to opt for a Let-To-Buy mortgage on their current home to enable them to negotiate chain free on their onward purchase. These clients are not actually that worried on the tax implications of such a move, instead taking the longer-term view that the capital growth achievable on two properties in prime areas of London mitigates the position in terms of additional SDLT on their onward purchase and the taxable rate of rental income on their previous property. First Time Buyers were also extremely active, again using their chain free position to negotiate a great deal, particularly as there has been a lot of stock come to the market both new build and second-hand properties meaning that vendors are prepared to take a view on asking price under the right circumstances. The trending view from clients at the end of the month and going into July was very much along the lines of as a buyer I m in the driving seat, and with stock levels on the increase over the Summer, coupled with the ultra-low interest rates available we would suggest that it s highly possible that the market may be unseasonally busy in pockets of London certain price points over the Summer. Richard Hullin - Swansea We had a record month in June in many respects. Most of our clients last month were First Time Buyers, which is really encouraging to see. We would suggest that this is mainly because landlords in Swansea and surrounding areas are currently easing off adding to their portfolios or even divesting of some units to mitigate their tax position, which is leaving more suitable properties for First Time Buyers to purchase. This, coupled with the record low rates available and more lenders providing products for those with 5% and 10% deposits, means that we ve seen a steep escalation in those getting on the ladder recently, and the E word barely made any difference to this picture last month. House prices also continued to remain consistent locally in June, with many properties selling at or very close to asking price; there certainly is little room for negotiation due to the continuing lack of properties for sale at the moment, particularly for second steppers and those who are looking for a larger family home. Fixed rate mortgages remain the preferred choice for most of our clients, whether they are remortgaging or moving house, although we have seen a move towards the sub-2% five year fixed deals which are available, rather than two year fixes which were more popular up until a couple of months ago. Lisa Berrido - Manchester June was exceptionally busy for us, despite the general Election, which didn t appear to make any difference to our clients one way or the other, and certainly didn t seem to have a negative impact on confidence in local market from our perspective. The majority of clients we assisted with mortgages in June were moving home, and in particular, we noticed an increase in the amount of first time buyers we assisted last month. This mainly seems to be as a result of the fact that it s cheaper locally to buy than rent currently, as rents have been increasing due to a perfect storm of lower levels of rental properties available with a significant proportion of landlords divesting some or all of their portfolios, or those investors who remain in the market having to increase rents in order to cover their increased expenses due to tax changes. With the landlords exiting the buy to let market selling properties which are ideal for first time buyers, coupled with the current ultra-low mortgage rates available on 95% and 90% mortgages, many people decided in June that they were just get on with it regardless of what s going on in the news, as it was the right time for them due to their individual circumstances. In terms of local property values, the combination of the lack of homes for sale locally coupled with ongoing demand from buyers means that properties which are realistically priced are achieving asking price and meaning that values are maintaining momentum, which we suspect is likely to be the case for the foreseeable future. Aaron Frizzel - Edinburgh Overall, the market in June remained steady, despite the general Election, which went by barely noticed by the majority of clients we assisted and had a negligible impact on the market in Edinburgh. The majority of our clients last month were moving home or first-time buyers, with activity levels pretty steady on the previous month. We also saw a consistent amount of enquiries from clients with regards remortgaging, with the current ultra-low 2 year fixed rate deals remaining popular. Property values in Edinburgh and the surrounding areas are continuing on a steady trajectory the lack of supply is ongoing, and means that buyers have to act quickly on properties they are interested in, which is helping to keep prices at their current levels, a trend we don t anticipate will change anytime soon.

8 8 Contact Details The National Mortgage Index The monthly National Mortgage Index has been created by mortgage broker Mortgage Advice Bureau to provide the most comprehensive overview of the UK mortgage market by an mortgage broker. For more information contact: Kate Hall at Mortgage Advice Bureau: M T Extn 2123 E kate.hall@mab.org.uk W Breakdown of regions North East: Northumberland Cumbria Tyne & Wear Cleveland Yorkshire & Humber: North, West and South Yorkshire Humberside North West: Lancashire Greater Manchester Merseyside and Cheshire East Midlands: Derbyshire Nottingham Lincolnshire Leicestershire West Midlands: Shropshire Stafford West Midlands Warwickshire Hereford & Worcester East of England: Norfolk Suffolk Cambs South East: Essex Herts Beds Bucks Oxon Berks Surrey Hants West & East Sussex Kent South West: Glos Avon Wilts Somerset Devon Dorset Cornwall Wales: All Greater London: All Scotland: All About Mortgage Advice Bureau The National Mortgage Index is based on monthly applications data compiled from over 950 advisers across the UK. All figures quoted are three month averages unless otherwise specified. Mortgage Advice Bureau is a mortgage network and the UK s best-known broker brand, winning over 70 national awards for the quality of its advice and service in each of the last five years. It has over 950 advisers offering expert mortgage advice on a local, regional and national level to UK consumers. Mortgage Advice Bureau handles over 12bn of loans annually. It was the first and is currently the only mortgage intermediary to have floated on the London Stock Exchange, having joined the Alternative Investment Market (AIM) in November Based on Opinium Research, Summer 2017.