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Loans for house purchase and remortgaging increase in May

11 Jul 11

Loans for house purchase and remortgaging increase in May

The number of loans for house purchase and remortgaging both increased in May, showing further signs of stabilisation in the mortgage market, according to new data from the Council of Mortgage Lenders. However, lending volumes are still weak on a historic basis.

There were 41,500 loans worth £5.9 billion advanced for house purchase in May, up from 40,800 (£5.9 billion in value) in April. Despite the monthly increase in house purchase activity, it is still below the level seen in May last year (43,800 advances worth £6.3 billion).

Remortgage lending picked up slightly in May. 29,000 remortgage loans were advanced, worth £3.6 billion, compared to 24,700, worth £3 billion, in April. Compared to May last year, remortgage lending has increased by 9% in value, but remains below the recent peak in March (£4.1 billion).

The majority of borrowers continued to opt for fixed rate mortgages in May (62%). It is likely that borrowers prefer the certainty of mortgage payments in a period when future interest rate movements are uncertain. Only 22% of all borrowers chose tracker mortgages in May. This represents a significant change from May a year ago when fixed rates were less popular at 46% and tracker mortgages more popular at 36%.

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
 
May 201141,500 5,90029,0003,600
Change from Apil 20111.7%n/c17%20%
Change from May 2010-5%-6%11%9%

Lending to first-time buyers was virtually unchanged in May. 15,900 first-time buyer loans were advanced compared to 15,800 in April. The value of these loans remained unchanged in May at £1.9 billion. Compared to May last year, first-time buyer activity has fallen by 2.5% in volume (from 16,300) and 5% in value (from £2 billion).

First-time buyers borrowed on average 80% of their property’s value in May for the second month in a row. This is still well below the 90% that first-time buyers typically borrowed before 2008, but has eased a little from the 75% experienced throughout 2009 and early 2010.

In May this year, only 3% 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.

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

May 201115,9001,90080%3.1413.3%
Change from April 20110.6%n/cn/c3.13n/c
Change from May 2010-2.5%-5%79%3.26n/c


The number of mortgages advanced to home movers edged up in May to 25,600 advances from 25,000 in April, while the value of loans advanced stayed the same (£4 billion). This is an increase of 2.4% by volume compared to April. There were larger year-on-year falls in lending to this group than in the first-time buyer sector, down by 7% in volume compared to May last year.

Home movers have typically borrowed just below 70% of their home’s purchase price since the middle of 2009 and this continued in May. 

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

May 2011

25,600

4,000

69%

2.82

9.9%

Change from April 2011

2.4%

n/c

69%

2.82

9.9%

Change from May 2010

-6.9%

-7.0%

68%

2.91

9.6%

Michael Coogan, CML director general said:

"Over the coming months seasonal factors are likely to push up lending for house purchase. There is no evidence of any drastic changes on the horizon or any significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year.

"Funding market conditions appear a little more positive, for example, recent securitisation deals suggest confidence has returned as investors regain their appetite to invest in bonds backed by mortgage assets. Overall this is a positive influence on mortgage market conditions."

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 June 2011 data will be released on Wednesday 10 August 2011.

Contact details
 
Name: Sue Anderson
Tel: 020 7438 8924
Email:
 
Name: Bernard Clarke
Tel: 020 7438 8923
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