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Stronger house purchase lending accompanied by weak remortgage lending in Wales

Published: 26 November 2012

The number of loans for house purchase in Wales increased in the third quarter showing a similar trend to the UK as a whole, according to new figures released today by the Council of Mortgage Lenders in Wales.

There were 5,900 house purchase loans advanced in Wales in the third quarter, up by 5% on the second quarter, but 5% lower compared to the same period last year.

By value, house purchase loans in the third quarter were worth £650 million, an increase of 8% on the previous quarter but down by 3% compared to the third quarter of 2011.

Lending to borrowers buying a home in Wales grew slower than in the UK, where there was an increase of 16% compared to the second quarter.

Chart 1: House Purchase lending in Wales, number of loans advanced, and house purchase lending in Wales as a proportion of the UK total (1 year moving average)

 Chart 1 - Wales q3 2012

Source: CML regulated mortgage survey

Similar to the UK, remortgage lending fell in the third quarter. A total of £300 million was advanced to borrowers remortgaging, down by 14% compared to the second quarter and by 32% compared to the third quarter last year. This represented a larger fall than in the UK overall where remortgage lending fell by 7% compared to the previous quarter and 24% compared to the third quarter last year.

Chart 2: Number of loans advanced for remortgage year-on-year % change UK v Wales

Chart 2 - Wales q3 2012

Source: CML regulated mortgage survey

Contributing to the increase in house purchase loans, the number of loans advanced to first-time buyers rose in the third quarter. In the last three months, 2,300 first-time buyers in Wales bought their first home. This represented a 10% increase compared to the second quarter, but unchanged from the same period last year.

Lending to first-time buyers in Wales totalled £220 million in the third quarter, up from £200 million in the previous quarter.

On average, first-time buyers in Wales continued to put down a smaller deposit than in the UK overall. In the third quarter, the loan-to-value (LTV) ratio remained unchanged compared to the first two quarters of 2012, at 85%. This compared favourably with the rest of the UK where first-time buyers typically borrowed 80% of the properties value.

Initial mortgage payments consumed 19.1% of first-time buyer income in the third quarter in Wales, unchanged compared to the second quarter and lower than the 20.1% in the UK overall.

Chart 3: First-time buyers number of loans and average LTV, Wales

Chart 3 - Wales q3 2012Source: CML regulated mortgage survey

Home movers in the third quarter accounted for a small increase compared to the previous quarter. A total of 3,600 loans were advanced to home movers, up by 3% compared to the second quarter, but down by 5% on the same period last year. By value, £430 million was advanced to home movers, compared to £410 million in the second quarter and £460 million in the third quarter last year.

The LTV ratio for home movers in Wales, at 71%, remained unchanged for the fourth consecutive quarter.

Peter Hughes, chair of CML Cymru, commented:

"With the number of house purchase loans increasing and remortgage lending fading, the market in Wales has shown similar trends to the UK overall. The launch of a mortgage indemnity scheme earlier this month should help people to access higher loan-to-value mortgages from spring next year, but as with the Funding for Lending scheme, it will take some time before we can assess the full impact."

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.2 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.

4. Data for the fourth quarter of 2012 will be released on Tuesday 26 February 2013

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