Following a quiet winter period, newly released CACI data analysed by first direct has revealed that mortgage applications saw a sharp rise in February as the market predictably shifts up a gear ahead of the spring rush.
February sees a steep rise in mortgage applications across the UK market
The value of the first-time-buyer market shot up in February, up 40% from £4 billion the month before to £5.6 billion. This is the highest figure recorded since early Autumn (September 2022).
The overall mortgage market mirrored this pattern of growth as February saw a sharp increase in the value of mortgage applications across the board, with this reaching £17.7 billion, up 39% month-on-month from £12.7 billion in January.
The volume of first-time buyer applications shows a small lag behind the recorded value, rising by 33% month-on-month – reflective of a significant increase in the average loan value.
This was reflected across the overall market, although the contrast between value and volume growth was not as accentuated in the total market data compared to the FTB pool. Across the total market, loan application volumes rose from 60,470 in January to 82,315, an increase of 36% (compared to value growth of 39%).
Carl Watchorn, head of mortgages at first direct, said: “February has seen a steep increase in mortgage applications across the housing market, after a subdued four-month period. It’s not unusual for January to be one of the quieter months of the year, with many house movers and buyers delaying plans until after the festive period. We saw a similar uplift of activity between January and February last year, which saw the value of mortgage applications shoot up 45% month-on-month.
“While January is often a month of small volume, the last two years show March as a record month for first-time buyer activity, with the value of applications tipping £10 billion in both 2022 and 2021. Although we are perhaps less likely to see next month match those numbers considering those were partially fuelled by the context of the post-pandemic housing market, we expect it will nonetheless continue on its upwards trajectory.
Average FTB loan value tips over £200,000 and overtakes remortgage average
The average first-time buyer loan reached £202,835 in February 2023, up from £194,582 as of the end of January.
This marked the first time the average application value has tipped over £200,000 since September 2022, when it stood at £210,340. Between September 2021 and September 2022, the average FTB loan value remained consistently above £200,000, showing the impact of a booming post-pandemic housing market.
The average home mover application value remains considerably higher than the average first-time buyer loan at £246,527 – however, the first-time buyer loan average value has overtaken the average re-mortgage for the first time in more than two years. The latter now stands at £201,133 whereas it usually is considerably higher than FTB average loans.
Carl Watchorn added: “Both the rising cost of living and the broader economic climate will be contributing factors to the average first-time buyer loan coming down significantly between October 2022 and January 2023. This will be due to people opting to borrow against cheaper properties, or waiting to save up a larger deposit in order to reduce the amount they borrow.
“Signs that average lending is back on the up is possibly an indication that the market is stabilising. It is also interesting to see that the first-time buyer average loan value has overtaken remortgages for the first time in a long time.
"This could suggest that some customers are using built-up savings to reduce their mortgage balance as they attempt to reduce the impact that the higher cost of borrowing will have on their monthly payments.”
FTB market still has a way to go to reach the average values of the last two years
Even though the FTB market is back on an upwards trajectory, numbers remain subdued compared to some of the peaks of the previous two years and are still lower than the 2022 monthly average value of £7.3 billion and the average 2021 value of £8.1 billion.
At £5.6 billion, the market is just over half of the values of February and March last year.
Carl concluded: “Over the last two years, Q2 has been a month of strong performance for the FTB market. If this trend persists this year, it will be a good indication of the direction of travel for the second half of the year.”