First-time buyer activity helped sustain lending for house purchase in June, according to data published today by the Council of Mortgage Lenders. The figures show that lending to first-time buyers during the month was at its highest since July 2010 – with the exception of March this year, when first-time buyer activity was boosted by the stamp duty concession.
First-time buyer purchases helped deliver an increase in lending for house-buying, but a contraction in remortgaging led to a decline in lending overall. Gross lending totalled £11.7 billion in June, 6% lower than May’s total of £12.5 billion and 7% lower than in last June.
Table 1: 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 | |
| June 2012 | 47,500 | 7,100 | 23,400 | 3,100 |
| Change from May 2012 | 1.7% | 1.4% | -20.9% | -18.4% |
| Change from June 2011 | -0.8% | 1.4% | -24.5% | -18.4% |
House purchase lending showed a modest increase in June, with 47,500 loans, worth £7.1 billion advanced (an increase on the preceding month of 2% by volume and 1% by value). Year-on-year, lending for house purchase was flat (down 1% by volume but up 1% by value). But there was a marked decline in remortgaging, perhaps driven by expectations that borrowing rates could fall later in the summer. Borrowers took out 23,400 remortgaging loans, worth £3.1 billion (21% lower by volume and 18% lower by value than in May, and down year-on-year 25% by volume and 18% by value).
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 | |
| June 2012 | 19,200 | 2,400 | 80% | 3.29 | 13.5 | 19.9 |
| Change from May 2012 | 9.1% | 9.1% | 80% | 3.24 | 13.2 | 19.6 |
| Change from June 2011 | 3.8% | 9.1% | 80% | 3.21 | 13.3 | 19.8 |
First-time buyer activity, which had been affected in the spring by the stamp duty concession ending in March, held up in June. The return to a more normal pattern of activity continued, with half of buyers in this group purchasing properties priced between £125,000 and £250,000, broadly in line with what we have seen since 2007 (the proportion had risen to 63% in March, driven by the stamp duty incentive) .
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 | |
| June 2012 | 28,200 | 4,700 | 70% | 2.91 | 10.3 | 19.4 |
| Change from May 2012 | -3.4% | -2.1% | 70% | 2.89 | 10.2 | 19.3 |
| Change from June 2011 | -3.8% | no change | 70% | 2.87 | 9.9 | 19.0 |
Loans taken out by movers in June totalled 28,200, worth £4.7 billion – around 3% lower by number than in May and in June last year. In the second quarter, however, movers took out 79,900 loans, 13% more than in the first three months of the year (71,000). Activity by movers was the main driver of a 6% increase in the number of loans for house purchase in the second quarter, with first-time buyer numbers in the first half of the year fluctuating as a result of the stamp duty changes.
Commenting on the data, CML director general Paul Smee said:
“Lending figures have see-sawed in the first half of the year, and we may see more fluctuations in the coming months as the effects of the Olympics and other special events in the UK this year are reflected in our lending numbers. Within that broader context, first-time buyer activity is showing some signs of resilience as we move away from the obvious effects of the stamp duty concession, a trend that it would be good to see maintained.”
Maeve Ward, Head of Sales, Secured Lending at Shawbrook said:
“It’s interesting to see that second charge loans have grown in quarter two of this year, whilst remortgaging numbers have dropped sharply.
“Secured loans (often called second-charge loans or home-owner loans) are a very viable alternative to remortgaging and we would encourage anyone who is thinking about a remortgage to consider a secured loan as an option. If someone has a good rate on their mortgage with an existing lender, a remortgage can mean losing that rate and therefore money. Remortgaging can incur penalties from some providers, while others prevent customers from changing the structure of their mortgage for an initial period. Secured loans allow customers to borrow quickly and at competitive rates without affecting their existing mortgage deal.
“We are finding that brokers are becoming more familiar with the secured loan market. At Shawbrook our secured lending business is growing rapidly, and we’re lending to customers for a variety of purposes from consolidating existing finance into a more affordable payment, to one-off payments such as home improvements, weddings, children’s university fees or long-planned holidays.”