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Small improvement for mortgage market in February

Published: 8 April 2011

Mortgage lending increased slightly in February after a particularly downbeat January, according to new figures from the Council of Mortgage Lenders.

There were 32,300 loans for house purchase, worth £4.6 billion, up 8% by volume and 5% by value from January, but down 12% (by volume and value) from February 2010. 

Remortgage lending also increased in February, from 23,200 to 24,300 worth £2.9 billion, a 5% increase in volume (no change in value) from January and up 3% by volume and down 3% by value from the same month last year. The Bank of England’s large increase in remortgage approvals in early 2011 has not yet fed though to completions but is expected during the next few months.

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 2011 32,300 4,600 24,300 2,900
Change from January 2011 8% 5% 5% n/c
Change from February 2010 -12% -12% 3% -3%

Increases in loans to both first-time buyers and home movers contributed to the boost to house purchase lending. First-time buyers made the largest contribution with the 12,400 loans (worth £1.4 billion) advanced in February amounting to a 13% increase in volume (8% in value) from January but an 11% decrease in volume (13% in value) from February 2010. The number of loans advanced to home movers increased by 6% (with the value unchanged) compared to January, but were also down from the same month last year, 12% by volume and 14% by value.

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 2011 12,400 1,400 80% 3.11 12.7%
Change from January 2011 13% 8% 80% 3.12 12.5%
Change from February 2010 -11% -13% 76% 3.22 13.4%


For the second month running first-time buyers typically borrowed 80% of their property’s value in February and they borrowed 3.11 times their income, the lowest income multiple since August 2009. Home movers have seen little change in the percentage of their property they borrow with the average fluctuating just under 70% since mid-2009. In February it was 69%. The proportion of their income home movers spend on mortgage interest payments has been in single figures since the start of 2010 with February’s being 9.5%.

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 2011

19,900

3,100

69%

2.86

9.5%

Change from January 2011

6%

n/c

68%

2.86

9.6%

Change from February 2010

-12%

-14%

68%

2.86

9.5%

With uncertainty surrounding the timing of future interest rate rises there has been a gradual shift back to fixed-rate products from the low of 45% in May 2010. In February, 57% of all mortgages advanced were at a fixed rate, up from 52% in January.

Bob Pannell, CML chief economist, said:

"The February fall in lending compared to last year was despite the fact that lending in the early months of 2010 was itself depressed following the end of the earlier stamp duty concession. But research suggests cash purchases have remained steady since the credit crunch, indicating that the housing market may be holding up better than the low mortgage lending levels suggest."

"We are likely to see a continuing increase in remortgage activity this year, especially if and when rate rises occur."

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 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 March 2011 data will be released on Friday 13 May 2011.

 

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