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Mortgage market saw modest recovery in February

Published: 13 April 2010

The number of loans advanced for house purchase increased by 12% in February, according to figures released today by the Council of Mortgage Lenders.

January was extremely weak due to one-off factors such as the effect of the end of the stamp-duty exemption in December 2009 and the severe winter weather. So the 35,000 loans advanced (worth £5 billion) signifies a modest recovery, although they were up by 49% in volume and by 67% in value from a year earlier.

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
 
February 2010 35,000 5,000 24,000 3,000
Change from January 2010 +12% +9% +2% n/c
Change from February 2009 +49% +67% -35% -38%


The end of the stamp duty holiday in December meant there were fewer first-time buyers in January. As a result their numbers rose slightly faster than the rest of the market in February with 12,600 loans advanced (worth £1.5 billion), up 13% by number and 15% by value on January.

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

February 2010 12,600 1,500 75% 3.11 13.3%
Change from January 2010 13% +15% 75% 3.08 13.2%
Change from February 2009 +40% +50% 75% 3.00 15.4%


Home mover activity, which was less affected by the stamp duty holiday of 2008 and 2009, did not see as much of a rebound. The number of transactions were still higher with 22,600 loans advanced, (worth £3.5 billion), up 11% by number and 6% by value on January.

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

February 2010

22,600

3,500

67%

2.81

9.6%

Change from January 2010

+11%

+6%

66%

2.81

9.8%

Change from February 2009

+54%

+67%

69%

2.69

11.8%

Remortgaging activity remains weak, although the 24,000 loans in February was up 2%, representing an increase for the first time in five months. This weakness in remortgaging is expected to continue for some time yet.

With interest rates at an historic low, fixed rate mortgages remain less popular than in the recent past. The proportion of fixed rate mortgages was 47% in February 2010, unchanged from January and the lowest share in around five years. The share of tracker products in February was 36%, again unchanged from January, but remained at its highest level since the CML began recording this data in March 2005.

Commenting on the data, CML head of research Bob Pannell said:

"With the supply of credit still tight and the upcoming election causing political uncertainty, we are unlikely to see much change in the near future although the new stamp duty exemption for first-time buyers could boost the market somewhat and we hope to see the traditional seasonal pick-up as the weather gets warmer and the days get longer.

"The start of the year is traditionally a quiet period for mortgage lending. This year though, transactions have been affected by the ending of 2009's stamp duty concession and the harsh weather, making it hard to identify clear trends in recent months."

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 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.

4. The March RMS data will be released on Monday 17 May 2010.

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