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Lending bounced back in May following end of stamp duty concession slump

12 Jul 12

Lending bounced back in May following end of stamp duty concession slump

The slump in activity that followed the end of the first-time buyer stamp duty holiday appears to have been short-lived as house purchase lending increased substantially in May, according to new statistics released today by the Council of Mortgage Lenders.

In May, house purchase lending increased by 36% compared to April and 29% compared to last May. The number of loans also increased, by 33% from April and by 24% from a year ago.

Remortgage lending also increased in May with £3.5 billion advanced for remortgage. This was up from £3.1 billion in April but down from £3.8 billion 12 months ago when there was a greater expectation of interest rate rises.

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 201248,3007,20027,9003,500
Change from April 201233%36%11%13%
Change from May 201124%29%-10%-8%

First-time buyer activity bounced back following the volatility of March and April. 18,100 loans, worth £2.3 billion, were advanced to first-time buyers in May, up from 12,700, worth £1.5 billion, in April. This may be a 43% rise (53% by value) from April but, following the distorting effects of the end of the stamp duty concession, this returns first-time buyer lending back to a similar level seen in the second half of 2011.

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

Proportion
of
income
spent on
capital and
interest payments

May 201218,1002,30080%3.2113.2% 19.6%
Change from April 201243%53%80%3.1212.5% 19.1%
Change from May 201122%28%80%3.1713.3% 19.8%


The characteristics of first-time buyer loans began to return to normal after March and April’s stamp duty effect. First-time buyers on average took out a loan of £104,000 in May, up from £97,750 in April. They also borrowed 3.21 times their income, up from 3.12 in April and they paid 19.6% of their income in capital and interest payments, up from 19.1%. All of these May figures are more in line with the typical experience over the last year. The proportion of first-time buyers buying properties valued at between £125,000 and £250,000 rose from 37% in April to 44% in May, but was not quite back at the norm of around 50% seen since 2007. 

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

Proportion
of
income
spent on
capital and
interest payments
 

May 201230,2004,90070%2.8810.2% 19.3%
Change from April 201229%29%70%2.8710.0% 19.1%

Change from May 2011

25%

29%70%2.8510.0% 19.0%

Lending to home movers also increased with 30,200 loans taken out, worth £4.9 billion. This was up 29% by number and value compared to April and up 25% (29% by value) from May 2011.

Repayment loans continue to dominate within all groups. 98% of loans taken out by first-time buyers were on a capital repayment basis, unchanged since March, 87% of home movers took this option, up from 85% in April and 82% of those remortgaging also did, unchanged since April.

CML director general Paul Smee commented:

"It is positive news for the market that the slump following the end of the stamp duty concession seems to have been short-lived. Lending is similar to late 2011 levels and showing a healthy improvement on the same time last year.

"However, the problems in the Eurozone have not gone away. Economic uncertainty could affect both the supply of mortgage lending and consumer confidence and we still anticipate a challenging lending environment for the rest of the year."

  

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% 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 2012 data will be released on Monday 13 August 2012.

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