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Lending to first-time buyers increases in February

Published: 15 April 2013

The number of first-time buyers increased by 3% in February, marking the best start to a year since 2008, according to new data released today by the Council of Mortgage Lenders.

Activity in the first-time buyer sector was 17% stronger in February than in February last year, and combined with January reached the largest number of first-time buyers in the first two months of the year since 2008.

Lending to home movers fell - contributing to an overall dip in house purchase lending - while remortgage lending also eased.

First-time buyers

A total of 16,400 loans were advanced to first-time buyers in February, up on 15,900 in January and 14,000 at the same time last year. By value, loans to first-time buyers totalled £2 billion, the same amount as the previous month, but 18% higher than in February 2012 (1.7 billion).

First-time buyers accounted for 43% of all house purchase loans in February. This was the sixth consecutive month that this indicator has been at or above 40%, suggesting that market conditions continue to improve for first-time buyers.

Indicators of loan affordability also suggest that the market was marginally more favourable for first-time buyers in February. First-time buyers typically borrowed a smaller amount in February than in January, both in absolute terms and relative to their income. First-time buyers typically borrowed 3.19 times their income in February, down from 3.2 times in January, while the average loan to value ratio remained at 80%.

This is likely to be associated with a shift towards the purchase of less expensive properties by first-time buyers, with a small increase in the proportion of properties bought for less than £125,000.

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
16,400 2,000 80% 3.19 12.5% 19.5%
Change from
January 2013
3.1% No change 80% 3.20 12.8% 19.8%
Change from
February 2012
17.1% 17.6% 80% 3.26 12.5% 19.5%

Home movers

Lending to home movers fell in February for the third consecutive month. A total of 21,500 loans were advanced to borrowers who moved in February, down by 4% compared to January and a fall of 3% on February last year. By value, home movers were advanced 3.5 billion in February, a 5% fall compared to January.

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
21,500 3,500 70% 2.86 9.4% 18.7%
Change from
January 2013
-3.6% -5.4% 70% 2.86 9.6% 18.9%
Change from
February 2012
-3.2% -2.8% 70% 2.93 9.8% 19.2%

House purchase lending

The underlying trend for resilient house purchase lending continued in February, with lending stronger than a year earlier. A total of 37,900 loans (worth £5.5 billion) were advanced in February, up by 5% on the same time last year (36,400 loans).

Month on month, house purchase lending dipped in February compared to January when 38,200 loans were advanced.

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
37,900 5,500 19,500 2,600
Change from
January 2013
-0.8% -3.5% -13.3% -13.3%
Change from
February 2012
4.7% 1.9% -30.9% -27.8%

Remortgage lending

Remortgage lending remained subdued in February, down compared to both the previous month and February 2012.

In February, £2.6 billion was advanced to borrowers remortgaging, a 13% fall compared to January (3 billion), and 28% lower than February last year (£3.9 billion).

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

"First-time buyers are continuing to take advantage of more favourable market conditions, helping to drive the underlying trend for resilient house purchase lending.

"We hope that the new initiatives announced by the government in the 2013 Budget will further stimulate first-time buyer activity but also help those 'second steppers'  looking to move into a new or existing home."

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 March 2013 data will be released on Tuesday 14 May 2013.

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