Lending to first-time buyers, home movers and remortgagors all increased in May, with a particularly marked increase in lending to first-time buyers, according to the latest Regulated Mortgage Survey data from the Council of Mortgage Lenders (CML).
The £8.4 billion of lending for house purchase accounted for 57% of all mortgage lending in May (by value), while remortgaging at £4 billion accounted for 27%, and other lending (including lifetime, buy-to-let and further advances) at £2.3 billion accounted for 16%.
Table 1: Loans for house purchase and remortgage
| NUMBER OF HOUSE PURCHASE LOANS | PURCHASE LOANS £M | NUMBER OF REMORTGAGE LOANS | VALUE OF REMORTGAGE LOANS £M | |
May | 55,900 | 8,400 | 29,500 | 4,000 |
Change from | 31.2% | 33.3% | 15.2% | 17.6% |
Change from | 18.7% | 18.3% | -1.0% | 2.6% |
The number of mortgages to first-time buyers in May reached 25,100 – 29% higher than in April, and 42% higher than in May last year. First-time buyers accounted for 45% of all loans for house purchase, similar to the levels of the past few months but considerably higher than the 38% seen on average since 2007.
The number of first-time buyer loans was the highest monthly figure since late 2007, and a marked contrast to the low point of just 8,500 loans in January 2009. By value, first-time buyer lending reached £3.4 billion in May, up from £2.5 billion in April and £2.2 billion in May last year.
For some months, there has been an increase in the number of first-time buyers entering the market with smaller deposits – this has now resulted in a shift in the average first-time buyer loan-to-value ratio rising to 83%, up from 81% in April and the highest ratio since November 2008. First-time buyers are also typically borrowing more (£113,400 in May, on average, compared with £110,000 in April and £105,000 in May last year), and typically now have higher incomes (£35,700 in May, up from £33,500 in May last year). The age of the typical first-time buyer remained at 29.
Table 2: First-time buyers, lending and affordability
| NUMBER OFLOANS | 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 | |
May | 25,100 | 3,400 | 83% | 3.29 | 12.1 | 19.3 |
Change from | 29.4% | 36.0% | 81% | 3.25 | 12.1 | 19.1 |
Change from | 41.8% | 54.5% | 80% | 3.24 | 13.2 | 19.6 |
The number of loans to home movers in May was up by 32% on April, an increase similar to that among first-time buyers, but unlike the first-time buyer market the number of home-mover loans rose by a more modest 4% compared with May last year. And, in contrast to the shift in first-time buyer loan profile, movers have experienced far less change in average loan size, income, or loan-to-value.
Table 3: Home movers, lending and affordability
| NUMBER OFLOANS | 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 | |
May | 30,700 | 5,100 | 71% | 2.87 | 9.0 | 18.2 |
Change from | 31.8% | 34.2% | 71% | 2.87 | 9.1 | 18.3 |
Change from | 4.4% | 6.3% | 70% | 2.89 | 10.2 | 19.3 |
Paul Smee, director general of the Council of Mortgage Lenders, said: “Although monthly lending is still running at far less than half its typical monthly level during the peak, there is no doubt that the mortgage market is firmly open for business. Both the borrowing appetite of first-time buyers, and the availability of attractive mortgages for them, have improved markedly since a year ago.
“What is interesting is that, in contrast to some recent assertions, this is happening in parallel with the strengthening buy-to-let market. It is perfectly possible for both the buy-to-let market and the first-time buyer market to improve at the same time, as the evidence clearly demonstrates.
“It is important that the supply of housing steps up, as increased housing supply is a crucial factor in ensuring that housing is affordable over the long term.”
David Copland, director of mortgage services for the financial services division of LSL, said: “These encouraging statistics reflects all the activity we’ve been seeing with brokers and estate agents across Pink and First Complete.
“First time buyers have been helped by the FLS scheme and lenders lending at higher loan to values and relaxing their criteria a little bit. In addition the new build market is very buoyant a good deal of which is being bought by first time buyers through the Help to Buy scheme although this has now been extended to second time buyers, which is particularly helping the new buy market at the moment.
“I see no reason why it won’t continue for the next quarter especially given Mark Carney’s comments that we will be in a low interest rate environment for some time to come. My concern is that we have a hiatus in the market which will result in a slowdown in the fourth quarter of this year when lender could well restrict lending to some extent as they prepare for the implementation of the Mortgage Market Review, and some borrowers may hold off taking out a mortgage until the second part of the Help to Buy scheme comes in, in January, at which point they will need much smaller deposits and the government will underwrite 20% of the loan.”
