July house purchase lending up on a year ago for first time in over two years

14 Sep 09

Although remortgaging remained unsurprisingly weak, lending for house purchase showed its first material annual growth in July for the first time since early 2007, according to the latest Council of Mortgage Lenders' survey.

At £14.5 billion, total gross lending rose significantly for the second month running, but was still 42% lower than in July last year. Within this, house purchase lending accounted for 56,000 loans totalling £7.5 billion - up from 47,000 loans totalling £7.1 billion in July last year.

Table 1: Loans for house purchase and remortgage

	Number of house purchase loans	Value of house purchase loans £m	Number of remortgage loans	Value of remortgage loans £m
July 2009	56,000	7,500	41,000	4,700
Change from June 2009	+24%	+27%	+21%	+12%
Change from July 2008	+19%	+6%	-53%	-61%

The rise in house purchase lending in July was concentrated more heavily towards home movers than in June, when the largest rise was seen in first-time buyer activity. There were 20,400 first-time buyer loans and 35,700 home mover loans in July, up 18% and 28% respectively on June. But compared with a year earlier, the rise in first-time buyer numbers was higher, up 22% compared with a 17% rise in the number of movers.

Table 2: First-time buyers, lending and affordability

	Number of loans	Value of loans £m	Average loan to value	Average income multiple	Proportion of income spent on interest payments
July 2009	20,400	2,300	75%	3.02	15.0%
Change from June 2009	+18%	+21%	75%	3.08	14.9%
Change from July 2008	+22%	+10%	86%	3.27	19.8%

Table 3: Home movers, lending and affordability

	Number of loans	Value of loans £m	Average loan to value	Average income multiple	Proportion of income spent on interest payments
July 2009	35,700	5,200	66%	2.70	11.1%
Change from June 2009	+28%	+27%	69%	2.76	11.3%
Change from July 2008	+17%	+4%	71%	2.91	17.0%

In terms of product choice, over three quarters of mortgages taken out in July were at fixed rates, with borrowers able to lock in to an average fixed rate of 4.7%, well below the average of 5.57% over the past decade.

Commenting on the latest survey data, CML economist Paul Samter observed:

It's tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing. But there are still constraints affecting the lending industry's capacity to fund increased lending, as well as less consumer motivation to remortgage for the time being. The overall lending picture is likely to stay relatively subdued for some time, especially as the wider economy is far from robust as yet."

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.2 trillion.

2. Source: CML/Banksearch.

3. The August RMS data will be released on Monday 12 October.