First time buyers up 41% on last year

Survey results published by the Council of Mortgage Lenders today show that this growth in July continued to be buoyed by home-owner house purchase lending, in particular by growth in first-time buyers.

The CML data (which, as of this month, includes buy-to-let) shows:

• Total home-owner house purchase lending continued to grow, up 9% on June and 21% on July last year.
• First-time buyers took out 25,300 loans in July, an increase of 5% on June and of 41% compared to July 2012.
• Home movers took out 32,000 loans, an increase of 12% compared to June and up 9% on July last year.
• Home-owner remortgage lending continued to pick up compared to July 2012 and recent months, although the £3.8bn advanced remains subdued compared to historical volumes.  
• Total buy-to-let loans advanced increased to 15,200 in July, up 12% compared to June.
• Within this, 7,600 buy-to-let loans in July were for house purchase, up by 7% compared to June.
• In contrast to the picture in the home-owner market, buy-to-let remortgage lending grew more strongly than house purchase, increasing by 24% compared to June to £1.1bn. 

Lending for home-owner house purchase

Total home-owner house purchase loans (both movers and first-time buyers) continued to show the resilience and growth seen throughout 2013. 57,400 house purchase loans were advanced in July, an increase of 9% on June and up by 21% on July last year. These loans had a total value of £9.1bn, which was an increase of 12% on June and 23% compared to July last year. 

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
July 2013	57,400	9,100	27,000	3,800
Change from June 2013	8.9%	12.3%	5.5%	8.6%
Change from July 2012	21.1%	23.0%	7.6%	15.2%

Lending to first-time buyers

The strong growth in lending to first-time buyers since the beginning of the year has continued, with the number of loans advanced increasing by 5% compared to June. In July, 25,300 loans were advanced to first-time buyers, worth £3.5bn. By value, first-time buyer lending was 6% up on June and 46% up on July last year. 

The typical first-time buyer loan size stayed almost unchanged from June at £117,038, while average first-time buyer household income increased to £36,142 from £35,873 in June.

Affordability improved marginally in July compared to June reflecting the average loan size remaining largely unchanged but a higher income average, alongside a further fall in typical interest rates. Typically, first-time buyers in July borrowed 3.31 times their income in comparison to 3.33 in June and mortgage payments (capital and interest) accounted for 19.2% of income, down from 19.3% in June.

Fall in home repossessions in the UK

The number of properties taken into possession by mortgage lenders declined in the second quarter of 2013, according to data published by the CML today. 

At 7,700, the number of possession cases was almost 4% lower than the 8,000 recorded in the first three months of the year, and was equivalent to 0.07% of all outstanding mortgages. 

In the first six months of the year, the number of cases of possession totalled 15,700, the lowest number since the second half of 2007, when there were 13,100 cases.

There was also a reduction in the number of mortgages in arrears in the second quarter. At the end of June, a total of 157,700 mortgages (equivalent to 1.4% of all loans) were in arrears of 2.5% or more of the balance, down from 159,700 at the end of March, and the lowest number recorded since the end of the third quarter in 2008.

Within the total number of mortgages in arrears at the end of June, 80,800 had arrears of more than 2.5% but less than 5% of the balance, 31,600 were in the range of 5-7.5% of the balance, 15,000 at between 7.5-10% of the balance, and 30,300 with arrears of 10% or more of the balance.

The CML's most recent forecast for 2013 is that there will be 35,000 cases of possession during the year, with 160,000 mortgages ending the year in arrears of more than 2.5% of the balance. At this stage, the CML has no imminent plans to revise the forecast.

Commenting on the data, the CML's head of policy Jackie Bennett said:

"Given the pressures on household incomes, the continuing modest decline in arrears and possessions is welcome. Low interest rates and lower than expected unemployment are providing some relief for households, and borrowers are continuing to prioritise mortgage payments while lenders are showing forbearance where it is viable.   

"Yesterday's message from the Bank of England provides some encouragement to those borrowers who are struggling that any rise from the current historically low Bank rate will be linked to an improvement in the wider economy. As ever, the key message for those borrowers is that they should talk to their lender as soon as possible if they believe they are in danger of missing a mortgage payment. Lenders want to keep people in their homes where possible, and most problems can only be contained if the borrower and lender work together at the earliest opportunity on a solution tailored to the borrower's circumstances."

Buy-to-let lending at highest level since 2008

BUY-TO-LET mortgages are at their highest level since 2008 and up 19% on last year.

Lenders advanced 40,000 mortgages, worth £5.1 billion, to buy-to-let investors in the second quarter of 2013, according to data published today by the CML. 

Both the number of buy-to-let loans, and the value of lending, were the highest since the third quarter of 2008.

Buy-to-let lending is continuing to recover strongly, but from a low base.

The number of loans advanced in the second quarter was 19% higher by volume and 21% higher by value than in preceding three months (when lenders advanced 33,500 mortgages, worth £4.2 billion). Year-on-year, buy-to-let lending was 19% higher by volume and 31% higher by value (33,600 loans in the second quarter of 2012, worth £3.9 billion).  

Lending for house purchase accounted for around half the buy-to-let loans advanced, and increased by 15% by volume and 19% by value over the preceding quarter. 

But the growth in remortgaging was stronger, with an increase over the same period of 24% by volume and 29% by value. This growth in remortaging partly reflects improved conditions in funding markets and more widespread availability of mortgage credit.

By the end of June, buy-to-let mortgages accounted for 13.3% of outstanding lending in the UK (up from 13.1% in the preceding quarter and 12.9% a year earlier). The number of outstanding mortgages totalled 1.48 million, worth £168.5 billion.

Buy-to-let mortgages in arrears of over three months accounted for 8.4% of the total, up slightly from 8.3% in the preceding quarter but down from 9.7% a year earlier. The possession rate, at 0.09%, was higher than the 0.07% in the wider mortgage market, but fell from 0.11% in the previous quarter.

Commenting on the data, the CML's head of policy Jackie Bennett said:

"Strong rental demand is contributing to the continuing expansion of the buy-to-let sector, but growth is also being helped by improved conditions in funding markets and more widespread availability of mortgages. 

"These conditions are creating more opportunities for landlords to remortgage, as well as helping to fund increased activity in the mortgage market more generally. This spring, we have seen the highest levels of lending to first-time buyers since 2007, alongside the continuing recovery in the buy-to-let market."

Gross mortgage lending at highest level since October 2008

Key points

• Gross mortgage lending in June increased to £15 billion
• This is a rise of 2% from £14.7 billion in May
• On an annual basis, this is 26% higher than the total of £11.9 billion in June 2012
• June 2013 is the highest monthly estimate for gross lending since October 2008

The Council of Mortgage Lenders estimates that total gross mortgage lending in June increased to £15 billion, representing a rise of 2% from £14.7 billion in May and 26% higher than the total of £11.9 billion in June 2012. This is the highest monthly estimate for gross lending since October 2008.

Gross lending for the second quarter of 2013 was therefore an estimated £42 billion. This represents a 24% increase from the previous three months and is the highest quarterly estimate since Q4 2008.

Commenting on market conditions in this month's Market Commentary, CML chief economist Bob Pannell observes:

"Improvements in the cost and availability of mortgage credit are underpinning a meaningful recovery in the housing market. In recent months, we have seen the strongest performance for mortgage lending since 2008.

"However, although the pace of first-time buyer activity is approaching a quarter of a million per annum, it is worth bearing in mind that this is still barely half of activity rates a decade earlier, and so far below what might be considered normal levels."

Duncan Kreeger, director of secured peer-to-peer lender West One Loans, comments,“Comparisons with October 2008 do nothing to hide the fact that mortgage lending in the UK still has a long way to go. In October 2008 the global economy was in free fall.  The financial crisis had just hit its very peak.  In the US emergency measures were agreed by Congress to prevent economic collapse.  In the UK, Gordon Brown spoke openly about a need to “save the world”.  Stock markets were tumbling.  Millions of people saw their financial future melt in front of their eyes.

“Unwieldy high street banks might never recover the levels of business they saw before the collapse – the largest lenders are still losing market share to new forms of finance.  We expect that to continue and we believe it’s a positive trend.  New financial models will be better for consumers, better for business, and a better way to prevent economic disasters like October 2008.”

42% more first-time buyers in May than a year ago

Lending to first-time buyers, home movers and remortgagors all increased in May, with a particularly marked increase in lending to first-time buyers, according to the latest Regulated Mortgage Survey data published today by the Council of Mortgage Lenders.

House purchase and remortgaging

The £8.4 billion of lending for house purchase accounted for 57% of all mortgage lending in May (by value), while remortgaging at £4 billion accounted for 27%, and other lending (including lifetime, buy-to-let and further advances) at £2.3 billion accounted for 16%.

Table 1: Loans for house purchase and remortgage

	NUMBER OF HOUSE PURCHASE LOANS	PURCHASE LOANS £M	NUMBER OF REMORTGAGE LOANS	VALUE OF REMORTGAGE LOANS £M
May 2013	55,900	8,400	29,500	4,000
Change from April 2013	31.2%	33.3%	15.2%	17.6%
Change from May 2012	18.7%	18.3%	-1.0%	2.6%

First-time buyers

The number of mortgages to first-time buyers in May reached 25,100 - 29% higher than in April, and 42% higher than in May last year. First-time buyers accounted for 45% of all loans for house purchase, similar to the levels of the past few months but considerably higher than the 38% seen on average since 2007.

The number of first-time buyer loans was the highest monthly figure since late 2007, and a marked contrast to the low point of just 8,500 loans in January 2009. By value, first-time buyer lending reached £3.4 billion in May, up from £2.5 billion in April and £2.2 billion in May last year.

For some months, there has been an increase in the number of first-time buyers entering the market with smaller deposits - this has now resulted in a shift in the average first-time buyer loan-to-value ratio rising to 83%, up from 81% in April and the highest ratio since November 2008. First-time buyers are also typically borrowing more (£113,400 in May, on average, compared with £110,000 in April and £105,000 in May last year), and typically now have higher incomes (£35,700 in May, up from £33,500 in May last year). The age of the typical first-time buyer remained at 29.

Home movers

The number of loans to home movers in May was up by 32% on April, an increase similar to that among first-time buyers, but unlike the first-time buyer market  the number of home-mover loans rose by a more modest 4% compared with May last year. And, in contrast to the shift in first-time buyer loan profile, movers have experienced far less change in average loan size, income, or loan-to-value.

Paul Smee, director general of the Council of Mortgage Lenders, commented:

"Although monthly lending is still running at far less than half its typical monthly level during the peak, there is no doubt that the mortgage market is firmly open for business. Both the borrowing appetite of first-time buyers, and the availability of attractive mortgages for them, have improved markedly since a year ago.

"What is interesting is that, in contrast to some recent assertions, this is happening in parallel with the strengthening buy-to-let market. It is perfectly possible for both the buy-to-let market and the first-time buyer market to improve at the same time, as the evidence clearly demonstrates.

"It is important that the supply of housing steps up, as increased housing supply is a crucial factor in ensuring that housing is affordable over the long term."

Highest monthly mortgage lending since October 2008

The Council of Mortgage Lenders estimates that total gross mortgage lending in May increased to £14.7. This is a rise of 21% from £12.2 billion in April and 17% higher than the total of £12.6 billion in May 2012. 

This is the highest monthly estimate for gross mortgage lending since October 2008.

Commenting on market conditions in this month's Market Commentary, CML chief economist Bob Pannell observes:

“The imminent change of guard at the Bank of England takes place against the backdrop of a modestly improving UK economy, albeit one that appears to rest upon a pick-up in consumer spending and a recovering housing market.

“Funding conditions, helped by the funding for lending scheme, continue to look favourable and are supporting more competitive mortgage pricing and availability and a gradual resumption of lenders’ risk appetite.

“While the direction of travel is clear and fits well with the more positive housing surveys from RICS and others, our forward estimate does imply somewhat stronger house purchase activity than we had been expecting. This may reflect a degree of pent up sales following the extended spell of poor weather earlier this year”.

Richard Sexton, director of e.surv chartered surveyors, said: “There’s finally some real energy and ambition in the mortgage market. Despite rising house prices, more buyers are accessing mortgages. Greater lending reflects returning confidence in the market. Even better news is that the increase in lending was powered by an increase in high LTV borrowers. First-time buyers in particular, have had a hard run of late. The sum they must save as a deposit to get onto the housing market is often crippling. Building the deposit is made all the more arduous by stubborn inflation, weak wage growth and low savings rates. But high LTV lending is 26% higher than last year. Lenders have been providing more support to high LTV borrowers, by offering a wider range of mortgages, and dropping rates.  Schemes such as Help to Buy offer further options. Now is the time for ambitious high LTV borrowers to get on the housing ladder.”