October saw a 14 per cent increase in lending to first-time buyers (FTBs) and home movers, compared to September when the market slowed, according to figures from the Council of Mortgage Lenders.
A total of 20,000 loans were advanced to FTBs in October, up 19 per cent on the previous year and worth £2.5 billion, while they continued to opt for properties priced between £125,000 and £250,000. The percentage of income consumed by initial mortgage interest and capital repayments was unchaged at 20 per cent.
At 80 per cent the average loan-to-value ratio was unchanged in October compared to August and September, a figure that has remained static for the last two years.
The number of house purchase loans advanced in October reached 49,500, up from 43,500 in September and 44,900 in October of last year.
By value, house purchase loans totalled £7.3 billion in October, up 11 per cent on September and the same period last year.
Although not matching the same rate of growth as first-time buyers, lending to home movers increased in October. A total of 29,400 loans were advanced to home movers, worth £4.8 billion, a rise of 13 per cent compared to September and up by 5 per cent on the same period last year.
Remortgage activity also increased in October, following weakness in the market for the majority of the year. This kind of lending totalled £3.5 billion for the month, up from £3.2 billion in September but remaining low compared to historical levels and at 10.3 per cent lower than October of last year.
The small up-tick in remortgage lending suggests that the Funding for Lending scheme may be starting to have an early effect on remortgage lending, after subdued activity early in the year. The scheme has the potential to boost remortgage lending activity more quickly than house purchase due to the longer lag time in buying a property.
Commenting on the data, CML director general Paul Smee said:
“More positive figures in October, after a slow September, suggest that the underlying trend in house purchase lending of modest year-on-year growth will continue. However, usual seasonal factors may act as a counter to lending levels in the coming months.
“An up-tick in remortgage lending may be an early sign of a small positive impact of the Funding for Lending scheme, but it’s still too soon to evaluate the effects of the scheme.
“If the incremental improvements in house purchase lending that we are currently seeing persist as we expect them to, then next year should feel a more stable and positive year in the housing and mortgage markets.”
