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Highest quarterly house purchase lending level since 2007

Published: 11 November 2014

New CML data on the characteristics of lending in September and the third quarter of 2014 show lending trends in first-time buyers, home movers, remortgages and buy-to-let.  

Monthly highlights:

  • First-time buyers saw a month-on-month lending decline for the second month in a row, with 26,800 first-time buyer loans in September - 3% fewer than in August, but still 16% up on September 2013. By value, there was £4 billion advanced to first-time buyers in September - 2% down on August but 25% higher than September last year.
  • Lending to home movers also weakened month-on-month for the second month in a row. In September, the number of loans advanced to movers was 31,700, a 10% fall on the previous month but up 11% on September last year. By value, lending to movers totalled £6 billion, 12% down on August but up 18% on September last year.
  • Remortgage lending activity saw an increase month-on-month in September, with the number of remortgage loans totalling 28,300. This was 20% up on August but 12% down on September last year. The value of these loans (£4.4 billion) was up 22% on the previous month but down 6% on September last year.
  • There were 18,100 buy-to-let loans in September, representing lending of £2.5bn. Following the August low of 15,700 loans worth £2.2 billion, this returned buy-to-let lending to levels very similar to July, up 24% by volume and 32% by value on September last year.   

Quarterly highlights:

  • In the third quarter as a whole, there were 84,100 first-time buyer loans - 3% up on the previous quarter, and 15% up on Q3 2013. In the third quarter as a whole, first-time buyers borrowed £12.5 billion - up 7% on the previous quarter and 24% on Q3 2013.
  • At 103,600 loans, there were 12% more home-mover loans in the third quarter than the second, and 10% more than in Q3 2014. On a quarterly basis, the value of home-mover lending was £19.8 billion, up 16% on the second quarter and 19% up on the third quarter 2013.
  • In the quarter, remortgage loans increased by 2% to 77,200 on the previous quarter, but down 13% on the third period of 2013. By value, remortgaging was 3% up on the second quarter and 6% up on Q3 2013.
  • The number of buy-to-let loans was 12% up on the second quarter and 18% up on Q3 2013. The value of these loans was 16% higher than the second quarter, and 28% up on Q3 2013.

Total gross lending in September was £18.1 billion. This was 1% lower than August (£18.2 billion) but 12% higher than September last year (£16.1 billion), according to the Bank of England. Gross mortgage lending for the third quarter of this year was therefore an estimated £56.1 billion. This represents a 9% increase from the second quarter of this year, and a 14% increase on the third quarter of 2013 (£49.1 billion).

Lending for home-owner house purchase

House purchase lending to home-buyers decreased month-on-month in September totalling 58,600 loans. This was down 7% compared to August with the value of these loans totalling £10bn, a fall of 8%. Compared to September 2013, the number of loans increased by 13% and the value of lending by 20%.    

In the third quarter, house purchase lending totalled 188,000 loans, up 8% on quarter two and up 12% on the third quarter 2013. This totalled £32.4bn, an increase on the second quarter of the year by 13% and up 21% on the same period last year.

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

 11.11.14 house purchase September 14

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
September 2014 58,600 10,000 28,300 4,400
Change from
August 2014
-7.0% -8.3% 19.9% 22.2%
Change from Sep 2013 13.1% 20.5% -12.4% -6.4%

Lending to first-time buyers

First-time buyer affordability changed fractionally, with first-time buyers typically borrowing 3.40 times their gross income, compared to 3.42 in August. The typical loan size for first-time buyers rose month-on-month to £125,999 in September, up from £125,375 in August. The typical gross income of a first-time buyer household changed slightly to £38,690 in September from £38,185 in August. 

In the third quarter of 2014, first-time buyers borrowed on average £125,875, up from 122,000 in the second quarter of the year. They typically borrowed 3.41 times their income, down from 3.46 in the second quarter of 2014. The average household income of first-time buyers increased to £38,420 in the period, up from £36,750 in the second quarter of 2014.   

First-time buyers in September paid 19.6% of gross income towards covering capital and interest payments, little changed from 19.7% in August but 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

 11.11.14 first time buyer September chart 14

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
Sept 2014 26,800 4,000 83% 3.40 12.0% 19.6%
Change from
August 2014
-3.2% -2.4% 84% 3.42 12.0% 19.7%
Change from
Sep 2013
16.0% 25.0% 80% 3.39 11.5% 19.2%

Lending to home movers 

Home movers typically borrowed 3.06 times their gross income in September, compared to 3.05 in August. The typical loan size for home movers was £154,800 in September, down from £155,995 in August. The typical gross household income of a home mover was £53,291 in September compared to £54,150 in August.

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

In the third quarter of 2014, home mover characteristics changed marginally within this period. Home movers borrowed on average £155,241, up from £150,995 in the second quarter of the year. They typically borrowed 3.05 times their income, down slightly from 3.08 in the second quarter of 2014. The average household income of home movers increased to £53,854 in the period, up from £51,265 in the second quarter of 2014.

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

 11.11.14 home mover chart September 14

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
September 2014 31,700 6,000 70% 3.06 9.1% 18.8%
Change from
August 2014
-9.9% -11.8%  70% 3.05 9.0% 18.8%
Change from
Sep 2013
10.8% 17.6% 70% 2.97 8.8% 18.3%

Lending to home owners for remortgage

Remortgage lending activity saw an increase month-on-month in September, with the number of remortgage loans totalling 28,300. This was 20% up on August but 12% down on September last year. The value of these loans (£4.4 billion) was up 22% on the previous month but down 6% on September last year.

In the quarter, remortgages loans increased by 2% to 77,200 on the previous quarter, but down 13% on the third period of 2013. By value, remortgaging totalled £11.9 billion, 3% up on the second quarter but 6% up on Q3 2013.

Chart 4: Number of loans advanced for remortgage per month

 11.11.14 remortgage September 14

Source: CML

Buy-to-let lending

There were 18,100 buy-to-let loans in September, representing lending of £2.5bn. The number and value of these loans were up compared to August by 15% and 14% respectively. Compared to September 2013, this was a 24% increase by volume and 32% by value. 

In the third quarter, the number of buy-to-let loans was 12% up on the second quarter and 18% up on Q3 2013. The value of these loans was 16% higher than the second quarter, and 28% up on Q3 2013.

Within the overall total of buy-to-let loans in September, 8,760 were advanced for house purchase and 9,260 for remortgage. The number of buy-to-let house purchase loans was up by 7% compared to August and up 15% compared to September last year. This totalled £1.1bn in value, up 8% on August and up 25% on September last year. 

The number of remortgage loans increased significantly in September, up 26% on August and up 35% compared to September last year. These loans had a total value of £1.4bn, up 23% on August and up 38% on September last year.

In the third quarter of 2014, there were 26,370 loans for buy-to-let house purchase, up 10% on the previous period and up 16% on the third quarter 2013. These loans totalled £3.3bn, up 12% quarter-on-quarter and up 26% on the third quarter last year.

Buy-to-let remortgage lending totalled 25,150 loans with a total value of £3.8bn, up by 16% by volume and 18% by value on the previous quarter. In comparison to the third quarter last year, total number of loans increased by 21% and the value of these loans increased in this period by 28%. 

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

 11.11.14 Buy to Let September chart

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
September 2014 18,100 2,500 8,760 1,090 9,260 1,370
Change from
August 2014
15.3% 13.6% 6.6% 7.9% 25.6% 23.4%
Change from September 2013 24.0% 31.6% 14.7% 25.3% 35.2% 38.4%

Paul Smee, director general of the CML, commented: 

“We are approaching the end of twelve months of change, transition and growth. This has been a year when lenders and intermediaries have been put under increased spotlight from regulatory, political and media spheres and have risen to meet the challenges. The lending market is healthier than it was a year ago, and set to remain so. Remortgaging has returned as a driver of lending volume in the buy-to-let sector. But any fears of over-heating in the housing market are now dissipating as house purchase lending activity seems to be softening.”

 

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 October 2014 data will be released on Thursday 11 December 2014.

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