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House purchase lending in August down 3% on July

Published: 9 October 2014

New CML data on the characteristics of lending in August show that lending declined slightly compared to July, the first month-on-month drop in house purchase lending volume since February this year. 

Monthly highlights:

  • First-time buyer lending declined in August compared to July, with 28,900 first-time buyer loans - 4% fewer than in July but 9% up on August 2013. By value, there was £4.4 billion of lending to first-time buyers - 4% down on July but 22% higher than August last year.
  • Lending to home movers also declined, with the number of loans advanced to movers totalling 36,500, a 3% fall on the previous month but up 7% on August last year. By value, lending to movers totalled £7 billion, 3% down on July but up 17% on August last year.
  • Remortgage lending activity saw a decrease month-on-month and also year-on-year in August. The number of remortgages in August was 4% down on July and 11% down on the same month last year. The value of these loans (£3.7 billion) was down 5% on the previous month and down 3% year-on-year.
  • Buy-to-let lending fell 13% over the month to £2.1 billion in August, but increased 11% compared to August last year.  

Total gross lending in August was £18.1 billion. This was 8% lower than July (£19.7 billion) but 10% higher than August last year (£16.4 billion), according to the Bank of England. 

Lending for home-owner house purchase

House purchase lending to home-buyers decreased month-on-month in August totalling 65,400 loans. This was down 3% compared to July with the value of these loans totalling £11.4bn, a fall of 3%. Compared to August 2013, the number of loans increased by 8% and the value of lending by 19%.    

Chart 1: Number of loans for home-owner house purchase per month

 09.10.14 August house purchase figures

Source: CML

Table 1: Loans for home-owner house purchase and remortgage

  Number of house
purchase loans
Value of house
purchase loans, £m
Number of
remortgage loans
Value of remortgage
loans, £m
August 2014 65,400 11,400 24,000 3,700
Change from
July 2014
- 3.3% -3.4% -4.4% - 5.1%
Change from Aug 2013 7.9% 18.8% -11.5% -2.6%

Lending to first-time buyers

First-time buyers saw the first month-on-month lending decline since January this year, with 28,900 first-time buyer loans in August - 4% fewer than in July, but still 9% up on August 2013. By value, there was £4.4 billion of lending to first-time buyers in August - 4% down on July but 22% higher than August last year.

The typical loan size for first-time buyers also fell slightly month-on-month to £126,198 in August, down from £127,500 in July. The typical gross income of a first-time buyer household changed slightly £38,649 in August from £38,866 in July. 

First-time buyers in August paid 19.7% of gross income towards covering capital and interest payments, little changed from 19.6% in July and still significantly less than the recent peak of 24.8% in December 2007. 

Chart 2: Number of loans advanced to first-time buyers per month

 09.10.14 August first time buyers

Source: CML

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
August 2014 28,900 4,400 83% 3.42 12.0% 19.7%
Change from
July 2014
-4.3% -4.3% 84% 3.41 11.9% 19.6%
Change from
August 2013
9.5% 22.2% 81% 3.37 11.7% 19.3%

Lending to home movers 

Lending to home movers also weakened, for the first time in five months. In August, the number of loans advanced to movers was 36,500, a 3% fall on the previous month but up 7% on August last year. By value, lending to movers totalled £7 billion, 3% down on July but up 17% on August last year.

Home movers typically borrowed 3.04 times their gross income in August, compared to 3.03 in July. The typical loan size for home movers was £156,750 in August, up from £155,999 in July. The typical gross household income of a home mover was £54,651 in August compared to £54,434 in July.

Home movers' payment burden remained relatively low in August at 18.8% of gross income being spent to cover monthly capital and interest payments, up slightly from 18.7% in July, but well below the recent peak of 23.8% in December 2007.  

Chart 3: Number of loans advanced to home movers per month

 09.10.14 August home movers

Source: CML

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
August 2014 36,500 7,000 70% 3.04 9.0% 18.8%
Change from
July 2014
-2.7% -2.8%  71% 3.03 8.9% 18.7%
Change from
Aug 2013
6.7% 16.7% 70% 2.93 8.7% 18.2%

Lending to home owners for remortgage

Remortgage lending activity saw a decrease month-on-month and also year-on-year in August. The number of remortgages in August was 4% down on July and 11% down on August last year. The value of these loans (£3.7 billion) was down 5% on the previous month and down 3% on August last year.

Chart 4: Number of loans advanced for remortgage per month

 09.10.14 August remortgage

Source: CML

Buy-to-let lending

There were 15,300 buy-to-let loans in August, representing lending of £2.1bn. The number of loans and the value of these loans was down 13% compared to July. Compared to August 2013, this was a 6% increase by volume and 11% by value. 

Within the overall total of buy-to-let loans, 8,400 were advanced in August for house purchase and 6,700 for remortgage. The number of buy-to-let house purchase loans was down by 13% compared to July but up 9% compared to August last year. This totalled £1bn in value, down 17% on July but up 16% on August last year. 

The number of remortgage loans decreased compared to July, down 14% and down slightly by 1% compared to August last year. These loans had a total value of £1bn, down 17% on July but up 4% on August last year.

Chart 5: Number of buy-to-let loans advanced for house purchase and remortgage per month

09.10.14 August buy to let
 

Source: CML

Table 4: Loans for buy-to-let house purchase and remortgage

   Number of Gross BTL advances in period Value of Gross BTL advances, £m   Number of BTL house purchase loans Value of BTL house purchase loans, £m Number of BTL  
remortgage loans
Value of BTL remortgage
loans, £m
August 2014 15,300 2,100 8,400 1,000 6,700 1,000
Change from
July 2014
-12.6% -12.5% -12.5% -16.7% -14.1% -16.7%
Change from August 2013 5.5% 10.5% 9.4% 16.3% -0.6% 4.2%

Paul Smee, director general of the CML, commented: 

โ€œThe lending climate had a glass half full, glass half empty feel about it in August. On the one hand it saw a decline in all lending types month-on-month, which would suggest a levelling off of the market, with remortgaging remaining flat. Yet, on the other hand, we saw the highest August house purchase lending levels since 2007, and the recent Bank of England Credit Conditions Survey expects an upward trend in remortgaging in the final months of the year. Overall, these figures give no support to any fears of a developing bubble in housing.

"This has been a year of major change, and the market has shown significant resilience and responsiveness to the changing environment, improving the availability of lending without compromising financial stability, as the Bank of England's assessment last week highlighted." 

 

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 11.1 million mortgages in the UK, with loans worth over £1.2 trillion.

2. Source: CML Regulated Mortgage Survey for all home-owner mortgage data. Buy-to-let data is sourced from a sample of CML members and has been grossed to estimate the industry total. The CML began collecting monthly data in January 2013 and will from now on report monthly buy-to-let data in this press release, alongside our home owner house purchase data.

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 September 2014 data will be released on Tuesday 11 November 2014.

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