New CML data released today on the profile of lending in August shows:
- Total home-owner house purchase lending continued to grow, up 7% on July and 15% on August last year.
- First-time buyers took out 27,100 loans in August, an increase of 7% on July and of 33% compared to August 2012.
- Home movers took out 34,200 loans, an increase of 7% compared to July and up 5% on August last year.
- Home-owner remortgage lending was 7% down in August compared to July but was nearly 11% up on August last year.
- Total buy-to-let loans advanced decreased slightly to 14,900 loans in August, compared to 15,200 in July, with a value of £1.9bn.
- Within this, 7,900 buy-to-let loans in August were for house purchase, up by 4% compared to July.
- Buy-to-let remortgage lending fell slightly to 6,900 loans in August from 7,200 loans in July.
As previously reported, gross UK mortgage lending held steady in August and was an estimated £16.4 billion. This is down 2% on July’s gross lending total of £16.7 billion but is 28% higher than August last year (£13 billion).
Lending for home-owner house purchase
Despite a slight decline in total gross lending in August, lending for home-owner house purchase continued to show growth. In total, 61,300 house purchase loans were advanced in August, up 7% on July and 15% compared to August 2012. This amounted to £9.7bn in total, a 7% increase on July and an increase of 20% by value compared to August last year.
Table 1: Loans for home-owner house purchase and remortgage
| Number of house purchase loans |
Value of house purchase loans, £m |
Number of remortgage loans |
Value of remortgage loans, £m |
|
| August 2013 |
61,300 | 9,700 | 25,100 | 3,500 |
| Change from July 2013 |
6.8% | 6.6% | -7.0% | -7.9% |
| Change from August 2013 |
15.4% | 19.8% | 10.6% | 16.7% |
Lending to first-time buyers
Lending to first-time buyers totalled 27,100 loans, an increase of 7% on July and a year-on-year increase of 33%. These loans totalled in value £3.8bn which was an increase of 9% compared to July and a 46% 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% of income in August, a figure it has fluctuated around since March. There was a record high of 86% of borrowers taking fixed rate mortgages with 94% of first-time buyers opting for a fixed rate mortgage.
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 | |
| August 2013 |
27,100 | 3,800 | 81% | 3.36 | 11.7% | 19.3% |
| Change from July 2013 |
7.1% | 8.6% | 82% | 3.31 | 11.8% | 19.2% |
| Change from August 2012 |
32.8% | 46.2% | 80% | 3.25 | 13.8% | 20.2% |
Lending to home movers
Loans advanced to home movers totalled 34,200 in August, which was up 7% compared to July and an increase of 5% on August 2012. Total lending to home movers was worth £6bn in August, an increase of 9% by value on August last year.
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 | |
| August 2013 |
34,200 | 6,000 | 70% | 2.91 | 8.7% | 18.2% |
| Change from July 2013 |
6.9% | 7.1% | 70% | 2.92 | 8.8% | 18.2% |
| Change from August 2012 |
4.6% | 9.1% | 69% | 2.89 | 10.3% | 19.3% |
Lending to home owners for remortgage
Home-owner remortgage fell by 7% 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% in value on July but up 17% 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.
Table 4: Loans for buy-to-let house purchase and remortgage
| Number of BTL house purchase loans |
Value of BTL house purchase loans, £m |
Number of BTL remortgage loans |
Value of BTL remortgage loans, £m |
|
| August 2013 |
7,900 | 900 | 6,900 | 1,000 |
| Change from July 2013 |
3.9% | 0.0% | -4.2% | -9.1% |
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.”
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.”