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First-time buyer activity receives October boost after slow September

Published: 12 December 2012

The number of loans advanced to first-time buyers in October returned to levels similar to those seen over the summer following a slow September, according to new data released today by the Council of Mortgage Lenders.

Lending to home movers also increased, contributing to a jump in house purchase lending. Remortgage lending, while still relatively modest, reached its highest level in 6 months.

First-time buyers

A total of 20,000 loans were advanced to first-time buyers in October, a rise of 14% compared to last month and up by 19% compared to this time last year. In total, loans to first-time buyers were worth £2.5 billion in October, up on the £2.2 billion in September and the £2.1 billion advanced at the same time last year.

At 80%, the average loan-to-value (LTV) ratio was unchanged in October compared to August and September – this figure has essentially remained static for the last two years.

First-time buyers continued to favour properties priced between £125,000 and £250,000 in October, with 49% buying properties in this band. The percentage of income consumed by initial mortgage interest and capital repayments was unchanged at 20.0%, remaining more favourable than in 2007 when total capital and interest payments typically consumed closer to 25% of first-time buyer income.

Loans to first-time buyers accounted for 40% of all house purchase loans in October for the second consecutive month.

Table 1: 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 Proportion of income spent on capital and interest payments
20,000 2,500 80% 3.23 13.5% 20.0%
Change from September 2012 14.3% 13.6% 80% 3.26 13.7% 20.0%
Change from
October 2011
19.0% 19.0% 80% 3.23 12.2% 19.5%

Home movers

Although not matching the same rate of growth as first-time buyers, lending to home movers increased in October. A total of 29,400 loans were advanced to home movers, worth £4.8 billion, a rise of 13% compared to September and up by 5% on the same period last year.

After 3 consecutive months at 69%, the LTV ratio for home movers ticked back up to 70% in October.

Table 2: 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 Proportion of income spent on capital and interest payments
29,400 4,800 70% 2.90 10.2% 19.4%
Change from September 2012 13.1% 9.1% 69% 2.90 10.4% 19.5%
Change from October 2011 4.6% 4.3% 70% 2.91 9.2 18.9%

House purchase lending

On the back of the rise in lending to first-time buyers and home movers, loans for house purchase returned to the underlying upward trend seen earlier in the year. A total of 49,500 house purchase loans were advanced in October, up from 43,500 loans in September and 44,900 loans in October last year. This represented a 14% increase compared to last month and a 10% rise on October last year. By value, house purchase loans totalled £7.3 billion in October, up by 11% on September and the same period last year.

Table 3: 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
49,500 7,300 26,900 3,500
Change from
 September 2012
13.8% 10.6% 11.6% 9.4%
Change from
October 2011
10.2% 10.6% -13.8% -10.3%

Remortgage lending

Following weakness in remortgage activity for most of the year, remortgage lending increased for the second consecutive month in October. Remortgage lending totalled £3.5 billion in October, up from £3.2 billion in September but remains low compared to historical levels and was 10.3% lower than October last year (£3.9 billion).

The small up-tick in remortgage lending suggests that the Funding for Lending scheme may be starting to have an early effect on remortgage lending, after subdued activity early in the year. The scheme has the potential to boost remortgage lending activity more quickly than house purchase due to the longer lag time in buying a property.

Commenting on the data, CML director general Paul Smee said:

"More positive figures in October, after a slow September, suggest that the underlying trend in house purchase lending of modest year-on-year growth will continue. However, usual seasonal factors may act as a counter to lending levels in the coming months.

"An up-tick in remortgage lending may be an early sign of a small positive impact of the Funding for Lending scheme, but it’s still too soon to evaluate the effects of the scheme.

"If the incremental improvements in house purchase lending that we are currently seeing persist as we expect them to, then next year should feel a more stable and positive year in the housing and mortgage markets."

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. The November 2012 data will be released on Wednesday 16 January 2013.

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