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House purchase activity increase driven by rise in first-time buyers

16 Jan 13

House purchase activity increase driven by rise in first-time buyers

Increased activity in the first-time buyer sector, as well as among home movers, contributed to a 6% rise in the number of loans for house purchase in November according to new data released today by the Council of Mortgage Lenders.

Lending to home movers also increased, while remortgage lending was down against the previous month and the same period in 2011.

First-time buyers

The number of loans taken out by first-time buyers reached the largest monthly total since the end of 2009 (except for March when the end of the stamp duty holiday boosted activity).

A total of 21,700 loans were advanced to first-time buyers in November, worth £2.7 billion, representing an 8% rise compared to October and up by 24% on November last year.

For the second consecutive month, loans to first-time buyers accounted for 41% of all house purchase loans. This is rather higher than the usual proportion of around 38%.

Indicators of loan affordability remained stable in November, with the median loan-to-value (LTV) ratio staying at 80% while the percentage of income consumed by initial interest and capital repayments was unchanged at 20.0%.

Table 1: 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
November
2012
21,700 2,700 80% 3.22 13.3% 20.0%
Change from
October 2012
8.0% 8.0% 80% 3.23 13.5% 20.0%
Change from
November 2011
24.0% 22.7% 80% 3.26 12.2% 19.3%

 Home movers

A total of 31,100 loans worth £5 billion were advanced to home movers in November, representing a 5% increase compared to October and up by 6% on the same period in 2011.

Home movers typically borrowed 2.86 times their income in November, down from 2.90 in October, while the percentage of income consumed by initial interest and capital repayments ticked down to 19.1%.

 Table 2: 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
November
2012
31,100 5,000 70% 2.86 9.9% 19.1%
Change from
October 2012
5.4% 4.2% 70% 2.90 10.2% 19.4%
Change from
November 2011
6.1% 4.2% 70% 2.91 9.2 18.9%

House purchase lending

As a result of the rise in loans to first-time buyers and home movers, total house purchase lending increased in November.

A total of 52,700 loans were advanced in the penultimate month of the year, up by 13% compared to the same period in 2011, and up by 6% compared to October. By value, house purchase loans were worth £7.7 billion in November, a rise of 10% on November last year and 4% compared to October.

Table 3: 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
November
2012
52,700 7,700 24,300 3,200
Change from
 October 2012
6.3% 4.1% -9.7% -8.6%
Change from
November 2011
12.6% 10.0% -26.4% -25.6%

Remortgage lending

Remortgage lending fell in November, continuing to run below year-earlier levels. A total of £3.2 billion was advanced, down from £3.5 billion in October and 26% lower than the same period in 2011.  

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

"Encouraging activity in the first-time buyer sector in November contributed to an uplift in house purchase lending suggesting that the underlying trend for year-on-year increases should continue.

"We expect the Funding for Lending scheme to continue to encourage a downward drift in interest rates. This may prompt an increase in remortgage activity as borrowers seek to take advantage of lower rates."

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 December 2012 data will be released on Tuesday 12 February 2013

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