An increase in lending to home movers was the key reason behind an increase in house purchase lending in July, according to latest data from the Council of Mortgage Lenders (CML).
There was an 8% rise in the number of loans taken out by home movers compared to June and a 4% increase on July last year.
Home movers were advanced 30,500 loans worth £5.1 billion in July, with the increase contributing to a jump in house purchase lending.
Table 1: 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 | |
July 2012 | 30,500 | 5,100 | 69% | 2.88 | 10.2% | 19.3% |
Change from June 2012 | 8.2% | 8.5% | 70% | 2.91 | 10.3% | 19.4% |
Change from June 2011 | 3.7% | 4.1% | 69% | 2.89 | 9.6% | 19.1% |
The CML said this continued an upward trend in house purchase lending following the expected drop in April, linked to the end of the stamp duty concession in March. A total of 49,500 loans were advanced (worth £7.6 billion) marking a 5% rise compared to both June and the same period last year, as well as a 7% rise in value on the previous month.
This meant a rise in gross lending, which totalled £12.7 billion in July, a 7% increase from £11.9 billion in June and up by 2% compared to July last year.
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 | |
July 2012 | 19,000 | 2,500 | 81% | 3.21 | 13.6% | 20.0% |
Change from June 2012 | -1.0% | 4.2% | 80% | 3.29 | 13.5% | 19.9% |
Change from June 2011 | 8.0% | 13.6% | 80% | 3.20 | 13.0% | 19.8% |
A total of 19,000 loans were advanced to first-time buyers, down from 19,200 in June, but stronger than at the same time last year.
These loans were valued at a total of £2.5 billion, a slight increase on the June figure, and the largest monthly total since March when lending was boosted by the end of the stamp duty holiday.
Despite an increase in total lending value and a fall in the number of loans, the median loan size for first-time buyers decreased in July compared to June. This was caused by an increase in the number of first-time buyers purchasing more expensive properties, with 14% of first-time buyers buying homes worth over £250,000 compared to 12% in June.
The CML said that at 81%, the average loan-to-value ratio (LTV) for a first-time buyer edged above 80% for the first time in over three years. This is in contrast to home movers, with borrowers in July taking out 69% of the properties value, compared to an average of 70% observed for almost a year.
Table 3: Loans for house purchase and remortgage
Number of house purchase loans | Value of house purchase loans £m | Number of remortgage loans | Value of remortgage loans, £m | |
July 2012 | 49,500 | 7,600 | 24,100 | 3,200 |
Change from June 2012 | 4.7% | 7.0% | 3.0% | 3.2% |
Change from June 2011 | 5.3% | 7.0% | -23.5% | -20.0% |
Remortgage lending rose slightly in July compared to June, but was 20% down on the same period last year. Lending totalled £3.2 billion in July, up from £3.1 billion in June but still well short of the £4 billion advanced for remortgaging in July 2011.
“July’s figures show a gradual improvement in the market with lending approaching the sort of levels we saw at the end of the stamp duty concession,” said CML director general Paul Smee.
“While overall market conditions remain tight, new initiatives such as Funding for Lending and NewBuy have the potential to help lending to continue to ease gradually.”
