Gross lending rebounded in May, as the mortgage market rallied from the significant decline seen in April, increasing by 25.4% on a monthly basis.

However, the monthly total of £17.26bn was still 34.9% off the pace set this time last year and the second lowest monthly total seen since June 2020.

The numbers come from the latest industry analysis by Sirius Property Finance which looked at how mortgage lending has shifted over the months and quarters, while it compared the size of the home purchase sector to the remortgage market, as well as the sector for other advances (mainly second charge loans).

In May total lending reached just £17.264 billion, a 25.4% month on month reversal in fortunes following a steep -28.9% drop between April and March when total lending plummeted to just £13.766bn.

However, the total level of lending seen in May of this year remained some -34.9% down on an annual basis and was still the second lowest monthly total seen since June 2020.

The latest data suggests that a sluggish second quarter is to follow, continuing the trend seen since the closing stages of last year.

Total quarterly lending fell by-4.7% between Q3 and Q4 of last year and by 26.5% between the final quarter of last year and the first of this year when it totalled £58.46bn.

So far in Q2, total lending sits at just £31bn, with one month’s figures left to report.

Anecdotally there’s been talk of new buyers being put off from buying in the current climate due to affordability constraints, caused by rising energy prices and escalating mortgage rates.

Perhaps it shouldn’t be a surprise therefore that the home purchase market now makes up a smaller proportion for the sector, as it accounted for 56.5% in May 2023, with remortgaging taking up 39.7%, and other advances making up the remaining 3.8%.

This compares to a 61.2% share for home purchase and a 33.8% share for remortgage in April, with the same trends also apparent when viewing market performance on a quarterly basis.

Like the wider mortgage sector, the remortgage sector has also shown signs of bouncing back following a poor April performance and this is likely to continue due to historic factors. In June 2021 house purchase lending spiked at £35.46bn, before the generosity of the stamp duty holiday was reined in at the end of that month.

Those who took out a two-year fixed rate mortgage at the time will have been forced to renegotiate their deals in May and June of this year.

This is likely to be a painful process for those affected, as 13 consecutive interest rate rises from the Bank of England mean their monthly payments are likely to be far higher than they were.

Sirius Property Finance head of corporate partnerships Kimberley Gates comments:

“It’s a worrying time for the housing market, as rapidly rising mortgage rates mean fewer people can afford to buy for the first time or take the next step on the ladder.

“The current environment is likely to have rocked confidence in housing, as fewer people will be in a hurry to get on the ladder when there’s speculation that prices could fall in the months ahead.

She concludes: “For those who are brave enough to buy in this environment, and who can make it work from an affordability perspective, the one positive is there’s the opportunity to haggle on the purchase price, as it’s more of a buyer’s market this year.”