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Low remortgaging figures mask rise in house purchase lending

12 Oct 12

Low remortgaging figures mask rise in house purchase lending

Gross mortgage lending was weighed down by weak remortgage lending in August, despite a strong increase in house purchase lending, according to new data from the Council of Mortgage Lenders.

Lending for house purchase rose by 12% compared to July, and by 11% compared to the same period last year.  A total of 55,300 loans were advanced for house purchase in August, worth £8.4billion, compared to 49,500 in July and 49,900 in August 2011, the largest number of loans advanced in one month since the summer of 2010.

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
August 2012 55,300 8,400 21,700 2,900
Change from
 July 2012
11.7% 10.5% -10% -9.4%
Change from 
August 2011
10.8% 9.1% -36.9% -32.6%


In contrast, remortgage lending continued its downward trend, accounting for just 22% of gross lending in August, compared to 33% in August last year. Remortgage lending totalled £2.9 billion in August, down by almost 33% compared to the same period last year and by over 9% from July.

This weakness in remortgage lending weighed down overall gross mortgage lending, which was 2% lower than the same period last year but up slightly compared to the previous month. Gross lending totalled £12.9 billion in August, compared to £12.8 billion in July.

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
August 2012 21,600 2,800 81% 3.23 13.8% 20.2%
Change from July 2012 13.7% 12.0% 81% 3.21 13.6% 20.0%
Change from August 2011 18.0% 21.7% 80% 3.22 13.0% 19.8%


Meanwhile, lending to first-time buyers rose by 14% in August compared to July and up by 18% on the same time last year. A total of 21, 600 loans were advanced to first-time buyers, worth £2.8 billion, only 2,600 fewer loans than in March when lending to FTBs was elevated by the end of the stamp duty holiday.

For the second consecutive month, the average loan-to-value (LTV) ratio for a first-time buyer remained above 80%. At 81%, the LTV ratio is at its highest point in over 3 years, although it is too early to draw any conclusions about any persistent trends or the impact of the New Buy scheme.

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
August 2012 33,800 5,700 70% 2.88 10.3% 19.3%
Change from July 2012 10.5% 11.8% 69% 2.88 10.2% 19.3%
Change from August 2011 6.6% 5.6% 70% 2.88 9.4 18.9%


Also contributing to the increase in house purchase lending, a total of 33,800 loans, worth £5.7 billion, were advanced to home movers in August. This represented a 10.5% increase on July and a 7% rise compared to August last year.

Commenting on the data, CML director general Paul Smee said:

“House purchase lending showed an encouraging rise in August but it’s unclear whether this reflects just the unravelling of previous factors such as the Jubilee and the Olympic Games, or a shift in the underlying picture.

“We will wait and see whether schemes such as Funding for Lending and NewBuy provide a further boost to the market in coming months.”

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 11.2 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 September 2012 data will be released on Monday 12 November 2012

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