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March sees continued growth in house purchase activity

Published: 17 May 2010

House purchase lending increased by 45% year on year in March, making it the ninth consecutive month of year-on-year growth, according to figures released today by the Council of Mortgage Lenders. Remortgaging, however, was 29% down year on year, the 23rd consecutive annual fall. This plainly shows the continuing trend of recovering house purchase activity but a moribund remortgage market.

The 45,000 loans for house purchase in March (worth £6.3 billion), were up 25% in volume (24% in value) from February and the 28,000 loans for remortgage (worth £3.5 billion) were up 23% in volume (21% in value).

For the first quarter as a whole, there were 112,000 loans for house purchase (worth £16.1 billion), down from 171,000 (worth £23.3 billion) in the last quarter of 2009 and 74,000 remortgage loans (worth £9.3 billion) down from 89,000 (worth £11.1 billion) in the last three months of 2009. No trend can be inferred from this though, given the distortion caused by the end of the stamp duty holiday in December.

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
 
March 2010 45,000 6,300 28,000 3,500
Change from February 2010 +25% +24% +23% +21%
Change from March 2009 +45% +62% -29% -29%

First-time buyer activity is now rebounding faster than home-mover activity with 17,300 loans to first-time buyers (worth £2 billion) in March, up 27% on February and 42% on March 2009. The 27,500 home-mover loans (worth £4.3 billion) was a 24% rise in volume (23% in value) on February and a 49% rise in volume (65% in value) on March last year.

March also saw first-time buyers borrow an average of 76% of the property price for the second month running. This is the first time average deposits for first-time buyers have been lower than 25% for more than one month since January 2009. Only time will tell if this genuinely reflects a tentative sign of easing, but for the time being deposit constraints remain tight in all areas of lending.

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

March 2010 17,300 2,000 76% 3.22 13.4%
Change from February 2010 +27% +25% 76% 3.21 13.4%
Change from March 2009 +42% +54% 75% 3.00 15.1%


For those with the deposits needed, low rates have made home loans initially very affordable. Home movers in March needed less than 10% of gross income to cover their mortgage interest payments. This is unchanged from February and is the lowest amount since the CML started recording this data in 1974.

First-time buyers have not seen quite as much benefit reflecting the fact that the best priced deals are available only to those with larger deposits. But even so, in the first three months of 2010, they needed just 13.3% of their income to cover their interest payments, the lowest since 2004.

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

March 2010

27,500

4,300

68%

2.86

9.7%

Change from February 2010

+24%

+23%

68%

2.86

9.7%

Change from March 2009

+49%

+65%

70%

2.69

11.4%

In terms of product choice, only 46% of new loans were fixed-rate deals in March. This has remained broadly unchanged for the first three months of 2010, but is down from 60% in the last quarter of 2009 and a peak of 80% last July. Tracker rates accounted for 37% of new mortgage lending, again broadly unchanged, but up from last July's low of 12%.

Commenting on today's figures, Michael Coogan, director general of the CML, said:

"Today's figures indicate there is currently some momentum to house purchase lending, but for the sake of the future health of the housing and mortgage markets, the new government will need to focus on the critical issue of funding and how to address the issues arising from the repayment of the emergency support provided during the financial crisis. The UK is at risk of a chronic under-supply of credit – and the rationing of mortgages for customers – for years to come."

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 11.4 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 April RMS data will be released on Tuesday 15 June 2010.

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