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January cheaper property sales hit by end of stamp duty holiday

Published: 12 March 2010

House purchase loans fell by more than three times the decline in remortgages in January, according to data released today by the Council of Mortgage Lenders. This emphatically demonstrates the effect on the mortgage market from the end of the temporary stamp duty holiday in December.

There were 49% fewer house purchase loans in January than in December but only 15% fewer remortgage loans. However, the 32,000 loans for house purchase, worth £4.7 billion, were up from the low of 23,000 (worth £3.1 billion) seen in January 2009. Conversely, the 24,000 loans for remortgage, worth £3 billion, were down from 45,000 (£6.2 billion) a year ago. This is the lowest monthly level of remortgage activity - both by number and value - in eight years of available data.

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
 
January 2010 32,000 4,700 24,000 3,000
Change from December 2009 -49% -45% -15% -12%
Change from January 2009 +38% +52% -47% -52%

First-time buyers recorded the largest drop among house purchasers, with a 54% drop (55% by value) from December to January, reflecting the fact that a high proportion would usually fall into the £125,000-£175,000 property value category and rushed through their purchase to complete in December.

There were 11,300 first-time buyer loans, worth £1.3 billion, in the month, down from 24,800 (£2.9 billion) in December 2009, but still up from 8,600 (worth £900 million) in January 2009.

Following a 63% increase in the number of first-time buyer transactions for properties in the £125,000-175,000 band in December, the number of equivalent transactions fell by 80% in January – to account for just 19% of all first-time buyer loans, down from a record 42% in December. Compared to a year earlier, the number of first-time buyer loans in this category was down 22%.

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

January 2010  11,300  1,300  75%  3.08  13.2%
Change from December 2009 -54% -55%  75%  3.22  14.1%
Change from January 2009  +31%  +44%  76%  3.04  15.9%


A similar picture can be seen amongst home movers. This group saw a 49% increase in transactions in the £125,000-175,000 category in December and a 71% drop in January – while transactions across the other price bands fell by a more modest 36% in the month.

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

January 2010

20,400

3,300

66%

2.81

9.8%

Change from December 2009

-46%

41%

69%

2.82

10.2%

Change from January 2009

+42%

+57%

68%

2.68

11.9%


Commenting on the data, CML director general Michael Coogan said:

“It was a quiet start to the year. Lending volumes in January were low, but we had predicted this would happen due to the end of the stamp duty holiday distorting December’s figures.

“When December and January data are taken together, they show little change in underlying market conditions compared with recent months, with activity still slow but well up on the lows of a year earlier. We expect lending over the coming months to remain weak as uncertainty over of the state of the economy and the upcoming election are likely to continue to hold back housing market activity.”

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 million mortgages in the UK, with loans worth over £1.2 trillion.

2. Source: CML/Banksearch.

3. The February RMS data will be released on Tuesday 13 April 2010.

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