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.”