While gross mortgage lending in the UK fell 2 per cent in August, compared to the previous month, totaling £16.4 billion, it remains 28 per cent higher than last year’s figure of £13 billion.
Lending for home-owner house purchase continued to show growth. In total, 61,300 house purchase loans were advanced in August, up 7 per cent on July and 15 per cent compared to August 2012. This amounted to £9.7bn in total, a 7 per cent increase on July and an increase of 20 per cent by value compared to August last year.
Lending to first-time buyers
Lending to first-time buyers totalled 27,100 loans, an increase of 7 per cent on July and a year-on-year increase of 33 per cent. These loans totaled in value £3.8bn, an increase of 9 per cent compared to July and a 46 per cent 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 per cent of income in August, a figure it has fluctuated around since March. There was a record high of 86 per cent of borrowers taking fixed rate mortgages with 94 per cent of first-time buyers opting for a fixed rate mortgage.
Lending to home movers
Loans advanced to home movers totalled 34,200 in August, which was up 7 per cent compared to July and an increase of 5 per cent on August 2012. Total lending to home movers was worth £6bn in August, an increase of 9 per cent by value on August last year.
Lending to home owners for remortgage
Home-owner remortgage fell by 7 per cent 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 per cent in value on July but up 17 per cent 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
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.
Lending for buy-to-let remortgage
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, commented: “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.”
Andy Knee, Chief Executive of LMS, said: “This is quite typical behaviour for the market – if you overinflate one area then another will inevitably suffer. With the early launch of the second phase of Help to Buy the cost of funding is at its lowest ever level. We are therefore likely to see the prosperous first-time buyer and home mover sectors continue their upward trajectory until some limiting factor is introduced.
“However, let’s not overlook the fact that these CML figures are indeed very encouraging. When you consider the year-on-year comparisons, all areas of lending have grown, indicating a stronger market overall.”
Karen Bennett, sales and marketing director, commercial mortgages, Shawbrook Bank, has commented on the buy-to-let figures as follows: “Despite a slight fall in buy to let lending in August, we’re still looking at a very strong market which is good news for the professional property investors we support. However as a lender who takes our responsibility seriously we’d offer a word of caution to those looking to take advantage of the buoyant market. The last quarter has seen high rents both in London and elsewhere in the country and while high yields may make investors inclined to borrow more accordingly, this can be a risky strategy.
“Property investors should be careful about borrowing up to the maximum based on the current rental figure as when interest rates return to normal levels they may be left with an investment that costs them money each month as the rent no longer covers the mortgage. We urge investors to be cautious and think of the long term impact and lenders to be responsible about the amounts they lend based on rental income.”
