From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

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Only a quarter of all new home loans in August were for remortgage

Published: 12 October 2010

Remortgaging accounted for only 25% of loans in August, the lowest proportion in over 10 years, according to the latest survey data from the Council of Mortgage Lenders.

August saw 25,000 remortgage loans, worth £3 billion, advanced by lenders. The number of loans was down 13% and the value down 14% from July. Both were 19% lower than a year ago. With interest rates expected to remain low for some time yet, there is little incentive for borrowers to move away from low reversion rates at the end of tie-in periods. And continuing tight credit conditions mean that some borrowers are unable to access new refinancing deals. So there is little prospect of a significant rise in remortgaging in the coming months.

There were 51,600 house purchase loans (worth £7.7 billion) advanced in August, a fall of 8% (by volume and value) compared to July. While this is in line with the usual summer lull in market activity, a rise of 3% (by volume) and 12% (by value) from August 2009 shows that 2010 house purchase lending is still proving slightly more robust than the low levels in the equivalent months of 2009.

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
 
August 2010 51,600 7,700 25,000 3,000
Change from July 2010 -8% -8% -13% -14%
Change from August 2009 +3% +12% -19% -19%

The 18,300 loans (worth £2.3 billion) advanced to first-time buyers in August represented a decline of 5% (by volume) and 4% (by value) from July. First-time buyer loans were also down 3% by number, but up 5% by value, compared with August last year. Deposit criteria for first-time buyers have varied a little on a monthly basis throughout the year to date, and appear to have eased again somewhat in August. First-time buyers in August put down on average a 21% deposit, compared to 24% in July.

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

August 2010 18,300 2,300 79% 3.17 13.5%
Change from July 2010 -5% -4% 76% 3.14 13.3%
Change from August 2009 -3% 5% 75% 3.10 15.3%


Home movers suffered more than first-time buyers from the summer lull in August with the 33,200 loans (worth £5.4 billion) advanced down 10% (by volume and value) on July and average deposits up from 33% in July to 34%. This saw movers in August borrowing at the lowest loan-to-value ratio for six years. However, in terms of lending levels there was some improvement on a year ago, with home-mover loans 7% up (by volume) and 13% up (by value) from August 2009.

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

August 2010

33,200

5,400

66%

2.83

9.5%

Change from July 2010

-10%

-10%

67%

2.86

9.6%

Change from August 2009

+7%

+13%

68%

2.78

11.4%

Fixed-rate products are enjoying a slow shift back to popularity with 52% of new borrowers opting for one in August, up from 51% in July. This is still far below 2009, when in July the proportion of new fixed-rate mortgages hit 80% but started to wane in popularity straight after.

CML director general Michael Coogan said:

"August is a traditionally slow month for mortgage lending and it was no different this year. We expect a quiet market to continue for the foreseeable future. While we do not know what the impact of the comprehensive spending review will be on our sector, it will clearly contain austerity measures that will likely further dampen consumers' appetite to borrow.

"We would expect lending to slow more significantly, year on year, as we head towards the end of the year, and it is unlikely that the uncertain environment will encourage a tick up of mortgage activity in 2011. With some uncertainty surrounding future house price trends, we would expect a muted market in the next few years. The problem of excess capital, that led to record lending and borrowing in 2007, has self corrected and will not return."

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. Please see the mortgage statistics timeline on our website for further information.

4. The September RMS data will be released on Thursday 11 November 2010.

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