Gross mortgage lending was burdened by weak remortgage lending in August, despite a strong increase in house purchase lending, according to new data from the Council of Mortgage Lenders (CML).
Lending for house purchase rose by 12% compared to July, and by 11% compared to the same period last year. A total of 55,300 loans were advanced for house purchase in August, worth £8.4billion, compared to 49, 500 in July and 49,900 in August 2011, the largest number of loans advanced in one month since the summer of 2010.
Table 1: Loans for house purchase and remortgage
Number of house | Value of house | Number of | Value of remortgage | |
August 2012 | 55,300 | 8,400 | 21,700 | 2,900 |
Change from | 11.7% | 10.5% | -10% | -9.4% |
Change from | 10.8% | 9.1% | -36.9% | -32.6% |
Remortgage lending continued its downward trend, accounting for just 22% of gross lending in August, compared to 33% in August last year. Remortgage lending totalled £2.9 billion in August, down by almost 33% compared to the same period last year and by over 9% from July.
This weakness in remortgage lending weighed down overall gross mortgage lending, which was 2% lower than the same period last year but up slightly compared to the previous month. Gross lending totalled £12.9 billion in August, compared to £12.8 billion in July.
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 2012 | 21,600 | 2,800 | 81% | 3.23 | 13.8% | 20.2% |
Change from July 2012 | 13.7% | 12.0% | 81% | 3.21 | 13.6% | 20.0% |
Change from August 2011 | 18.0% | 21.7% | 80% | 3.22 | 13.0% | 19.8% |
Meanwhile, lending to first-time buyers rose by 14% in August compared to July and up by 18% on the same time last year. A total of 21, 600 loans were advanced to first-time buyers, worth £2.8 billion, only 2,600 fewer loans than in March when lending to FTBs was elevated by the end of the stamp duty holiday.
For the second consecutive month, the average loan-to-value (LTV) ratio for a first-time buyer remained above 80%. At 81%, the LTV ratio is at its highest point in over 3 years, although it is too early to draw any conclusions about any persistent trends or the impact of the New Buy scheme.
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 2012 | 33,800 | 5,700 | 70% | 2.88 | 10.3% | 19.3% |
Change from July 2012 | 10.5% | 11.8% | 69% | 2.88 | 10.2% | 19.3% |
Change from August 2011 | 6.6% | 5.6% | 70% | 2.88 | 9.4 | 18.9% |
Also contributing to the increase in house purchase lending, a total of 33,800 loans, worth £5.7 billion, were advanced to home movers in August. This represented a 10.5% increase on July and a 7% rise compared to August last year.
CML director general Paul Smee said: “House purchase lending showed an encouraging rise in August but it’s unclear whether this reflects just the unravelling of previous factors such as the Jubilee and the Olympic Games, or a shift in the underlying picture.
“We will wait and see whether schemes such as Funding for Lending and NewBuy provide a further boost to the market in coming months.”
