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Modest activity for mortgage market in April

14 Jun 11

Modest activity for mortgage market in April

Loans for house purchase increased in April, according to data released today from the Council of Mortgage Lenders. But, with Bank of England data showing a fall in house purchase approvals in April, there could be a lull in house purchase completions in the next few months.

There were 40,900 loans, worth £5.9 billion, advanced for house purchase in April, up from 37,900, worth £5.5 billion, in March and down from 41,900, worth £6 billion, a year earlier. While this is a further increase compared to earlier in the year, house purchase activity is still below the level seen in April last year.

Remortgage lending fell in April. 24,700 remortgage loans were advanced, worth £3 billion, compared to 34,100, worth £4.1 billion, in March. This is fractionally higher than April last year.

With remortgage activity currently linked to expectations of interest rate movements, future activity will be subdued as an imminent increase in the bank rate is now looking less likely. There was also a fall in remortgage approvals in April so remortgage completions are likely to remain modest in the coming months.   

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
 
April 201140,9005,90024,7003,000
Change from March 20118%7%-28%-27%
Change from April 2010-2%-2%1%n/c

The number of loans to first-time buyers increased by 8% in April, from 14,700 (worth £1.7 billion) in March to 15,800 (worth £1.9 billion). Loans were also up slightly from 15,700 (also worth £1.9 billion) in April 2010.

First-time buyers borrowed on average 80% of their property’s purchase price in April, more than for most of the last two and a half years, but still well below the 90% that first-time buyers typically borrowed before 2008.

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

April 201115,8001,90080%3.1313.3%
Change from March 20117%12%79%3.1512.9%
Change from April 20101%n/c79%3.2613.6%


Mortgages to home movers also increased in April, with 25,100 advances, worth £4 billion. This is an increase of 8% (5% by value) compared to March, but, unlike lending to first-time buyers, a fall of 4% (2% by value) compared to a year ago.

Home movers have typically borrowed just below 70% of their home’s purchase price since the middle of 2009 – in April it was 69%.   

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

April 2011

25,100

4,000

69%

2.82

9.9%

Change from March 2011

8%

5%

68%

2.85

9.7%

Change from April 2010

-4%

-2%

69%

2.90

9.7%

For the second month running, in April 2011, only 4% of first-time buyers took out an interest-only mortgage. Before 2008, it was typical for around 30% of loans to first-time buyers to be on an interest-only basis. This shows here has been a clear shift away from interest-only mortgages, in particular for first-time buyers, since the financial crisis.

Michael Coogan, CML director general said:

"The market continues on a stable footing and the increase in house purchase lending is a good sign that the stability will continue throughout 2011. However, the economic outlook, coupled with Bank of England subdued approvals data for April, suggests a muted summer for mortgage completions so we do not expect further increases in lending over the coming months."

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 94% of all residential mortgage lending in the UK. There are 11.3 million mortgages in the UK, with loans worth over £1.2 trillion.

2. Source: CML Regulated Mortgage Survey.

3. The Council of Mortgage Lenders does not publish statistics for mortgage approvals. The data in our monthly Regulated Mortgage Survey and gross lending press releases relate to mortgage advances only. A mortgage approval is the firm offer to a customer of a specific amount of credit secured against a particular property. A mortgage advance is the total amount of loan actually provided to the buyer, by the lender. Please see the mortgage statistics timeline on our website for further information.

4. The May 2011 data will be released on Monday 11 July 2011.

 

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