House purchase lending to home-buyers increased month-on-month in July totalling 67,700 loans, up 10% compared to June and the value of these loans totalled £11.8bn, a rise of 15% on June, the Council of Mortgage Lenders (CML) has revealed.
Compared to July 2013, the number of loans increased by 21% and the value of lending by 33%.
There were 30,200 first-time buyer loans in July – 3% more than in June, and 25% up on July 2013. By value, there was £4.6 billion of lending to first-time buyers in July – 10% up on June and 39% higher than July last year.
The typical loan size for first-time buyers continued to rise to £127,500 in July, up from £123,750 in June and the highest average loan size for a first-time buyer on record. The typical gross income of a first-time buyer household also grew to £38,900 in July compared to £37,095 in June.
First-time buyers’ in July paid 19.6% of gross income towards covering capital and interest payments, up from 19.3% in June, but still significantly less than the recent peak of 24.8% in December 2007.
Home mover lending continued to strengthen with stronger month-on-month growth than first-time buyers. In July, the number of loans advanced to movers was 37,500, 15% up on the previous month and 19% on July last year. By value, lending to movers totalled £7.2 billion, 20% up on June and 31% up on July last year.
Home movers typically borrowed 3.03 times their gross income in July, compared to 3.08 in June. The typical loan size for home movers was £156,000 in July, up from £153,800 in June. The typical gross household income of a home mover was £54,400 in July compared to £52,000 in June.
Home movers’ payment burden remained relatively low in July at 18.7% of gross income being spent to cover monthly capital and interest payments, up slightly from 18.6% in June, but remains lower than the recent peak of 23.8% in December 2007.
Remortgage lending, unlike house purchase lending, saw a decrease in both volume and value in July compared to the same month in 2013. However, a month-on-month comparison shows growth in both number and value.
Home-owner remortgage lending in July totalled 25,100 loans advanced in the period, which was an increase of 4% on June but a decrease by 15% on July 2013. These loans totalled £3.9bn in value, an increase of 3% month-on-month but a decrease of 5% on July 2013.
There were 17,500 buy-to-let loans in July, representing lending of £2.4bn. The number of loans was up 12% compared to June and there was an increase of 9% in value. Compared to July 2013, this was a 18% increase by volume and 26% by value.
Within the overall total of buy-to-let loans, 9,600 were advanced in July for house purchase and 7,800 for remortgage. The number of buy-to-let house purchase loans was up by 17% compared to June and up 29% compared to July last year. This totalled £1.2bn in value, up 20% on June and up 41% on July last year.
The number of remortgage loans increased compared to June, but at a lower rate than house purchase lending, up 8% and up 9% compared to July last year. These loans had a total value of £1.2bn, up 10% on June and 20% on July last year.
Paul Smee, director general of the CML, said: “The market has shown steady growth in house purchase and buy-to-let over the past few months with general improvements in economic factors across the UK allowing for more people to enter the property market.
“There have been many factors over the past year that could have caused disruption but the market has remained resilient and lenders have shown themselves adaptable to all this change. The CML will continue working towards making sure future initiatives affecting the market, such as the European Mortgage Credit Directive, are introduced with equally minimal disturbance to borrowers and lenders.”
Jonathan Harris, director of mortgage broker Anderson Harris, said: “Loans for home movers and first-time buyers drove the housing market in July as borrowers took advantage of low mortgage rates and more stock coming onto the market.
“Given that rates are so competitive, it is surprising that remortgaging continues to be muted. This may be down to borrowers fearing that they won’t be able to remortgage as a result of the new mortgage rules or simply enjoying such good standard variable rates that they don’t see the point. Until an interest rate rise is imminent, many borrowers who are reluctant to remortgage are unlikely to feel the urge to do so.
“What may convince them is some of the great new rates coming onto the market since the summer. Lender competition is hotting up with Barclays, Nationwide, Skipton and Coventry all cutting their fixed rates this week. Falling Swap rates, as well as lenders looking to meet year-end targets, is behind these moves. With Mark Carney alluding to the possibility of a rate rise in the spring, borrowers may feel that the case for remortgaging is getting stronger.
“First-time buyers continue to return to the market, and in July took on the highest average loan size for a first-time buyer on record. While this may be cause for concern, the new mortgage rules should at least ensure that those mortgages are affordable both now – and in the future, when rates rise. However, borrowers still need to be cautious about the level of borrowing they are taking on and not overstretch themselves.
“Buy-to-let continues to grow as investors seek better returns than they can earn on cash and more certainty than the stock market. Lenders have been cutting buy-to-let rates and easing criteria but the threat of regulation of some buy-to-let loans will introduce an unwelcome extra level of complexity and cost.”
