House purchase lending recorded its highest January total since 2008, according to new data from the Council of Mortgage Lenders (CML).
Despite a seasonal monthly fall, house purchase lending rose by 11% compared to January last year.
First-time buyer and home mover activity rose compared to January last year, while remortgage lending was still 23% lower than at the start of 2012.
A total of 38,300 loans were advanced for house purchase in January, down on the 45,900 taken out in December, but an increase from the 34,600 loans advanced in January last year. By value, house purchase lending totalled £5.7 billion, compared to £5.2 billion in January last year, and £6.9 billion in December 2012.
Continuing the underlying trend for increased house purchase lending, January marked the best start to a year since 2008 – when 47,800 loans were advanced.
Both first-time buyer and home mover lending contributed to the rise in January compared to the same time last year, but the increase in lending to first-time buyers was proportionately higher.
Table 1: Loans for house purchase and remortgage
Number of house | Value of house | Number of | Value of remortgage | |
January | 38,300 | 5,700 | 22,500 | 3,000 |
Change from | -16.6% | -17.4% | 3.2% | 3.4% |
Change from | 10.7% | 9.6% | -22.9% | -23.1% |
A total of 15,900 loans (worth £2 billion) were advanced to first-time buyers in January, up by 24% compared to January last year (12,800 loans), but an 18% fall from December 2012 (19,500 loans).
It was the largest January total since January 2008 when 17,700 loans were advanced.
For the third consecutive month, first-time buyer activity accounted for 42% of all house purchase loans, suggesting that the market remains more favourable for first-time buyers.
There was also a slight shift towards cheaper properties among first-time buyers with a small increase in the proportion of properties bought for less than £125,000. This increase is likely to reflect monthly variation and is largely in line with recent months.
Associated with this, first-time buyers typically borrowed a smaller amount in January than in December – both in absolute terms and relative to their income. First-time buyers typically borrowed 3.2 times their income in January, down from 3.28 times in December and 3.23 in January last year.
The average loan-to-value ratio remained at 80% for first-time buyers in January – essentially unchanged for over two years.
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 | |
January | 15,900 | 2,000 | 80% | 3.20 | 12.8% | 19.8% |
Change from | -18.5% | -20.0% | 80% | 3.28 | 13.2% | 19.9% |
Change from | 24.2% | 25.0% | 80% | 3.23 | 12.2% | 19.2% |
A total of 22,300 loans (worth 3.7 billion) were advanced to home movers in January. This was a 3% rise (by both number and value) compared to January last year, but a 16% fall from December.
Following a similar trend to first-time buyer activity, the number of loans advanced to home movers in the first month of the year reached its highest point since January 2008.
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 | |
January | 22,300 | 3,700 | 70% | 2.86 | 9.6% | 18.9% |
Change from | -15.5% | -15.9% | 70% | 2.90 | 9.9% | 19.0% |
Change from | 2.8% | 2.8% | 70% | 2.94 | 9.6% | 19.1% |
In January, £3 billion was advanced for remortgaging, an increase of 3% on December 2012 (£2.9 billion) but still 23% lower than January last year (£3.9 billion). Remortgage lending remains subdued but it now appears to have stabilised at this lower level, after falling sharply throughout 2012.
CML director general Paul Smee said: “Seasonal factors clearly had an impact on lending figures in January, but it still remains the best start to a year since 2008. Mortgage finance is available and lenders are open for business, allowing more borrowers to take the step into homeownership or move house in line with their needs.”
