Gross UK mortgage lending held steady in August and was an estimated £16.4 billion, according to the Council of Mortgage Lenders (CML).
This is down 2% on July’s gross lending total of £16.7 billion but is 28% higher than August last year (£13 billion).
Despite a slight decline in total gross lending in August, lending for home-owner house purchase continued to show growth. In total, 61,300 house purchase loans were advanced in August, up 7% on July and 15% compared to August 2012. This amounted to £9.7bn in total, a 7% increase on July and an increase of 20% by value compared to August last year.
Table 1: Loans for home-owner house purchase and remortgage
Number of house | Value of house | Number of | Value of remortgage | |
August | 61,300 | 9,700 | 25,100 | 3,500 |
Change from | 6.8% | 6.6% | -7.0% | -7.9% |
Change from | 15.4% | 19.8% | 10.6% | 16.7% |
Lending to first-time buyers totalled 27,100 loans, an increase of 7% on July and a year-on-year increase of 33%. These loans totalled in value £3.8bn which was an increase of 9% compared to July and a 46% increase by value on August last year.
Accompanying this upward trend in activity, first-time buyers borrowed more relative to income in August compared to July – 3.36 times borrower income in August compared to 3.31 in July.
However, due to the downward trend in mortgage interest rates, total mortgage payments have remained low relative to income. The typical first-time buyer mortgage payment represented 19.3% of income in August, a figure it has fluctuated around since March. There was a record high of 86% of borrowers taking fixed rate mortgages with 94% of first-time buyers opting for a fixed rate mortgage.
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 | 27,100 | 3,800 | 81% | 3.36 | 11.7% | 19.3% |
Change from | 7.1% | 8.6% | 82% | 3.31 | 11.8% | 19.2% |
Change from | 32.8% | 46.2% | 80% | 3.25 | 13.8% | 20.2% |
Loans advanced to home movers totalled 34,200 in August, which was up 7% compared to July and an increase of 5% on August 2012. Total lending to home movers was worth £6bn in August, an increase of 9% by value on August last year.
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 | 34,200 | 6,000 | 70% | 2.91 | 8.7% | 18.2% |
Change from | 6.9% | 7.1% | 70% | 2.92 | 8.8% | 18.2% |
Change from | 4.6% | 9.1% | 69% | 2.89 | 10.3% | 19.3% |
Home-owner remortgage fell by 7% in August compared to July with 25,100 loans advanced, but this was significantly up on August 2012. The value of these loans totaled £3.5bn which was a decrease of 9% in value on July but up 17% compared to August last year.
Bank of England approvals figures suggest this same pattern for remortgaging will continue into September completions figures.
Lending for buy-to-let decreased slightly in August totaling £1.9bn compared to £2bn in July. Total amount of loans for buy-to-let was 14,900 in August, a slight decrease on 15,200 in July.
Buy-to-let house purchase loans increased to 7,900 in August from 7,600 in July. However, the value of these loans remained the same at £900m.
Table 4: Loans for buy-to-let house purchase and remortgage
Number of BTL house | Value of BTL house | Number of BTL | Value of BTL remortgage | |
August | 7,900 | 900 | 6,900 | 1,000 |
Change from | 3.9% | 0.0% | -4.2% | -9.1% |
The small fall in buy-to-let lending was caused mainly due to a fall in buy-to-let remortgage lending from £1.1bn in July to £1bn in August. This came to 6,900 loans in August compared to 7,200 in July.
Paul Smee, director general of the CML, said: “The healthy growth in all lending areas compared to the same time last year is indicative of more confidence in the market. The high number of borrowers, in particular first-time buyers, opting for fixed rates reflects the attractive pricing currently on products which can provide helpful stability to borrowers for the next few years.”
