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Seasonal dip in lending masks strongest January since 2008

Published: 14 March 2013

House purchase lending recorded its highest January total since 2008, according to new data released today by the Council of Mortgage Lenders.

Despite a seasonal monthly fall, house purchase lending increased by 11% compared to January last year.

Driving this increase, first-time buyer and home mover activity rose compared to January last year, while remortgage lending was still 23% lower than at the start of 2012.

House purchase lending

A total of 38,300 loans were advanced for house purchase in January, down on the 45,900 taken out in December, but an increase from the 34,600 loans advanced in January last year. By value, house purchase lending totalled £5.7 billion, compared to £5.2 billion in January last year, and £6.9 billion in December 2012.

Continuing the underlying trend for increased house purchase lending, January marked the best start to a year since 2008 - when 47,800 loans were advanced.

Both first-time buyer and home mover lending contributed to the rise in January compared to the same time last year, but the increase in lending to first-time buyers was proportionately higher.

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
38,300 5,700 22,500 3,000
Change from
December 2012
-16.6% -17.4% 3.2% 3.4%
Change from
January 2012
10.7% 9.6% -22.9% -23.1%

First-time buyers

A total of 15,900 loans (worth £2 billion) were advanced to first-time buyers in January, up by 24% compared to January last year (12,800 loans), but an 18% fall from December 2012 (19,500 loans).

It was the largest January total since January 2008 when 17,700 loans were advanced.

For the third consecutive month, first-time buyer activity accounted for 42% of all house purchase loans, suggesting that the market remains more favourable for first-time buyers.

There was also a slight shift towards cheaper properties among first-time buyers with a small increase in the proportion of properties bought for less than £125,000. This increase is likely to reflect monthly variation and is largely in line with recent months.

Associated with this, first-time buyers typically borrowed a smaller amount in January than in December - both in absolute terms and relative to their income. First-time buyers typically borrowed 3.2 times their income in January, down from 3.28 times in December and 3.23 in January last year.

The average loan-to-value ratio remained at 80% for first-time buyers in January - essentially unchanged for over two years.

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 Proportion of income spent on capital and interest payments
15,900 2,000 80% 3.20 12.8% 19.8%
Change from
December 2012
-18.5% -20.0% 80% 3.28 13.2% 19.9%
Change from
January 2012
24.2% 25.0% 80% 3.23 12.2% 19.2%

Home movers

A total of 22,300 loans (worth 3.7 billion) were advanced to home movers in January. This was a 3% rise (by both number and value) compared to January last year, but a 16% fall from December.

Following a similar trend to first-time buyer activity, the number of loans advanced to home movers in the first month of the year reached its highest point since January 2008.

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 Proportion of income spent on capital and interest payments
22,300 3,700 70% 2.86 9.6% 18.9%
Change from
December 2012
-15.5% -15.9% 70% 2.90 9.9% 19.0%
Change from
January 2012
2.8% 2.8% 70% 2.94 9.6% 19.1%

Remortgage lending

In January, £3 billion was advanced for remortgaging, an increase of 3% on December 2012 (£2.9 billion) but still 23% lower than January last year (£3.9 billion). Remortgage lending remains subdued but it now appears to have stabilised at this lower level, after falling sharply throughout 2012.

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

"Seasonal factors clearly had an impact on lending figures in January, but it still remains the best start to a year since 2008. Mortgage finance is available and lenders are open for business, allowing more borrowers to take the step into homeownership or move house in line with their needs."

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 11.3 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 February 2013 data will be released on Monday 15 April 2013.

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