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Growth in remortgage lending helps boost gross lending

13 Jun 13

Growth in remortgage lending helps boost gross lending

Gross mortgage lending grew by 5% in April, in part due to an increase in remortgage activity, according to new data released today by the Council of Mortgage Lenders.

Remortgage activity gained some ground in April while house purchase lending edged down in April compared to March.

Remortgage lending

A total of £3.4 billion was advanced to borrowers remortgaging in April, up by 10% compared to March. There was still a 3% fall compared to April last year but the rate of fall has decreased over the past two months.

Table 1: Loans for house purchase and remortgage

 Number of house
purchase loans
purchase loans, £mNumber of
remortgage loans
Value of remortgage
loans, £m
April
2013
42,600 6,300 25,600 3,400
Change from
March 2013
-0.9% No change 7.1% 9.7%
Change from
April 2012
22.4% 21.2% -5.5% -2.9%

First-time buyers

First-time buyers took out 19,400 loans (worth £2.5 billion) in April, down by 1% compared to March. Although year-on-year comparisons are distorted by the impact of the end of the stamp duty concession on lending in March and April last year, activity in the first four months of the year (70,700 loans) was 11% stronger than the same period last year (63,500 loans).

First-time buyers continued to account for an increased proportion of all house purchase loans. 46% of all house purchase loans in April were advanced to first-time buyers (unchanged from March) but considerably higher than the 38% average seen since 2007.

First-time buyers typically borrowed a slightly larger amount in April than in March. First-time borrowers typically borrowed 3.25 times their income, up marginally from 3.24 times in March. Despite the modest increase in loan size relative to income, first-time buyer mortgage payments took a slightly lower proportion of their income - 19.1% in April compared to 19.3% in March.

In April, the average loan-to-value ratio edged up to 81% which could be an indicator of higher loan-to-value mortgages feeding though to the average loan-to-value figure.

Table 2: First-time buyers, lending and affordability

 Number of loansValue of loans £mAverage loan to valueAverage income multipleProportion of income spent on interest paymentsProportion of income spent on capital and interest payments
April
2013
19,400 2,500 81% 3.25 12.1% 19.1%
Change from
March 2013
-1.0% No change 80% 3.24 12.2% 19.3%
Change from
April 2012
57.7% 66.7% 80% 3.16 12.6% 19.1%

Home movers

A total of 23,500 loans (worth £3.8 billion) were advanced to home movers in April, down by 1% (3% by value) compared to March but an increase of 4% (3% by value) compared to April last year.

Table 3: Home movers, lending and affordability

 Number of loansValue of loans £mAverage loan to valueAverage income multipleProportion of income spent on interest paymentsProportion of income spent on capital and interest payments
April
2013
23,300 3,800 71% 2.87 9.2% 18.3%
Change from
March 2013
-0.9% -2.6% 70% 2.88 9.3% 18.4%
Change from
April 2012
3.6% 2.7% 70% 2.90 10.0% 19.1%

House purchase lending

House purchase activity was little changed in April, and like the underlying components - first-time buyer and home mover activity - the number of loans advanced edged down slightly.

While there was no change in the value of house purchase lending, the number of loans advanced dipped compared to March. A total of 42,600 house purchase loans (worth £6.3 billion) were advanced in April, compared to 43,000 loans in March. As with first-time buyers, comparisons with a year earlier are distorted by the end of the stamp duty concession, but if we compare the first four months of this year with the same period last year there was a 1% increase in house purchase activity.

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

"Lending to first-time buyers remains above the levels seen at the same time last year, despite the boost caused by the end of the stamp duty holiday in March last year.

"The Help to Buy scheme announced in this year's Budget should provide a further boost to the first-time buyer and home mover markets, but we still await further details on how the initiatives will work."

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 May 2013 data will be released on Friday 12 July 2013.

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