The total number of loans advanced to home-owners for house purchase rebounded strongly from its seasonal fall in September, up in volume 17% in October and a year-on-year increase of 24%, according to the Council of Mortgage Lenders (CML).
First-time buyers were advanced 26,800 loans in October, the highest number of loans in a monthly period since November 2007. The number of loans advanced to home movers increased 19% in volume compared to September and was up 16% compared to October last year.
Lending for home-owner house purchase increased in October, up 17% compared to September and up 24% on October last year. Overall, 60,800 loans were advanced in October with a total in value of £9.7bn, which was an increase of 17% by value on September this year and a year-on-year monthly increase in value of 33%. This is the second highest monthly lending amount for home-owner house purchase since November 2007, behind December 2009 when volumes that month were inflated by the impending end of the stamp duty holiday.
There were 26,800 loans to first-time buyers in October, an increase of 16% on September and up 33% compared to October 2012.
These loans totalled £3.7bn in value which was an increase of 16% compared to September and a 48% increase on October last year.
The typical first-time buyer income multiple declined slightly, with first-time buyers typically borrowing 3.36 times their gross income, compared to 3.39 in September. The typical loan size for first-time buyers was £119,500 in October. This was the highest ever recorded level but, in parallel to this, the typical income of first-time buyer households rose to £36,460, which was also the highest ever recorded level.
The continued downward drift in mortgage interest rates have kept borrowers’ payment burden low. First-time buyers spent 19.3% of gross income to cover capital and interest payments, slightly above the 19.2% in September and close to the lowest recorded monthly figure since 2005 of 19.1% recorded in April 2012 and April 2013.
The number of loans advanced to home movers for house purchase totalled 33,900 in October, up 19% compared to September and up by 16% compared to October last year. Home mover loans totalled £5.9bn in value in October, which was up 16% on September and 23% compared to October last year.
Home-owner remortgage activity declined in October with a total of 28,300 remortgage loans advanced in the period, down 12% compared to September and a 3% fall compared to October last year. These loans totalled £4.2bn in value, a decrease of 11% on September but up 14% compared to October 2012.
Lending for buy-to-let increased in October with 16,200 buy-to-let loans advanced, which was up 11% in volume compared to September. The value of these loans totalled £2.1bn, an increase of 10.5% from September.
Buy-to-let lending for house purchase also grew in October to 8,500 loans advanced, which was an increase of 11.3% compared to September. The loans totalled in value £1bn, an increase of 14.9% compared to September.
Buy-to-let remortgage lending also increased in October, up 11% compared to September. This totalled 7,600 loans advanced for buy-to-let remortgages which had a total value of £1.1bn, an increase in value of 11% compared to September.
Paul Smee, director general of the CML, said: “After years of a relatively flat mortgage market, 2013 has shown signs of lending turning a corner and looks set to finish the year strongly. Increased financial optimism among the public as the economy recovers seems to be driving this upward trend and it is welcome to see that first-time buyers continue lending momentum as more look to own their first home.”
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), added: “Today’s figures continue to paint a picture of a stronger market that is better equipped to meet pent-up demand from first time buyers, as well as smoothing the path of home movers looking to scale the housing ladder. We have now seen over £50bn of gross lending in the last three months alone [to October], and with the closure of the Funding for Lending Scheme (FLS) for mortgages in 2014 there is every incentive to make as many loans as possible before the year end. Of course this might trigger a lull early next year but there is an extra kick to come when the gates fully open for lending to applicants through the Help to Buy mortgage guarantee scheme.
“The lack of movement in the average size of first-time buyer loans compared to the value of their homes* shows how important it is to support higher loan to value (LTV) mortgages. With challenger banks actively joining high street brands within Help to Buy 2, we should see more progress on this score from January. This added impetus will be welcome relief for those first-time buyers still finding it hard to raise a deposit.
“Overall, confidence has replaced hope for buyers seeking a mortgage, and the market as a whole is approaching the year end with more optimism than has been the case for many years. Growth of house prices and overall lending remains modest compared to historic levels and the Bank of England has a stronger remit to guard against excess growth. We can expect Bank of England action if it is required.”