The total number of loans advanced to home-owners for house purchase decreased in January, down 16% compared to December but up 30% on January 2013. Overall, 48,600 loans were advanced in January with a total in value of £8bn, which was a decrease of 14% in value on December 2013 but a 43% increase in comparison to January 2013.
The total number of loans advanced to first-time buyers in January totalled 21,800, down 18% on December 2013, but an increase of 38% compared to January 2013. The total value of these loans was £3.1bn, down 16% on December 2013, but a year-on-year increase of 55% in comparison to January 2013.
The typical first-time buyer income multiple decreased, with first-time buyers typically borrowing 3.39 times their gross income in January, compared to 3.43 in December 2013. First-time buyers in January spent 19.3% of gross income to cover capital and interest payments, slightly higher than the 19.2% in December 2013 but down from 19.8% in January 2013. In addition, over 95% of first-time buyers opted for fixed rate mortgages in January.
It appears that the introduction of the Help to Buy mortgage guarantee scheme has started to have an impact on FTB deposit requirements. The average loan-to-value for first-time buyers was 82% in January, up from 80% seen in December 2013 and a year previous in January 2013.
The number of loans advanced to home movers for house purchase totalled 26,800 in January, down 15% in volume compared to December but up by 25% compared to January 2013. Home mover loans totalled £4.9bn in value in January, which was a month-on-month decrease of 13% compared to December, but up 36% compared to January 2013.
In contrast to the month-on-month decrease in lending for home-owner house purchase, home-owner remortgage activity increased in January with a total of 28,000 remortgage loans advanced, up 10% in volume compared to December and up 16% compared to January 2013. These loans totalled £4.2bn in value, an increase of 11% on December and up 31% compared to January 2013.
Gross buy-to-let advances in January totalled 15,700 loans, which was up 8% compared to December 2013 and up 37% compared to January 2013. The value of these loans totalled £2.1bn, which was an increase of 11% compared to December and up 40% compared to January 2013.
Similarly, Buy-to-let loans for house purchase followed the same trend up 11% in January to 8,100 loans in total compared to December, and up 34% compared to January last year. The loans totalled £900m in value, which again was up 7% compared to December and up 32% compared to January 2013.
In parallel to this, buy-to-let remortgage lending increased in January to 7,500 loans, which was up 6% compared to December and up 42% compared to January 2013. These buy-to-let remortgages had a total value of £1.1bn, up 10% compared to December and a year-on-year increase of 55% compared to January 2013.
Paul Smee, director general of the CML, commented:
"January is always a subdued month in the mortgage market but the underlying trend and strong year-on-year growth across all borrower groups indicates a strong start to 2014 continuing the sort of lending levels seen throughout 2013. Lending to first-time buyers and home movers has continued its upward trend and this, coupled with the growth in remortgage and buy-to-let activity, would suggest that all parts of the market are open for business."
Mark Harris, chief executive of mortgage broker SPF Private Clients, says:
"The number of first-time buyers increased substantially in January compared with a year ago as the second phase of Help to Buy really kicked in, enabling those buying for the first time to get on the housing ladder with a modest deposit. Encouragingly, the typical income multiple decreased while over 95 per cent of first timers wisely opted for a fixed rate. This is likely due to a combination of extremely cheap fixed-rate money, as well as concerns that interest rates will rise at some point so it's important to plan ahead.
"While more lenders are offering high loan-to-value products at more competitive rates, the average LTV for first-time buyers was a modest 82 per cent in January. This suggests that buyers are saving hard to take advantage of cheaper mortgage rates or getting help from the Bank of Mum and Dad. It doesn't suggest that borrowers are over-extending themselves and taking on more borrowing than they can afford.
"With the introduction of the Mortgage Market Review just over a month away, there are fears that there will be a slowdown in lending as lenders get to grips with the new requirements. Processing times for mortgage applications are likely to increase as a more forensic approach to expenditure is adopted but it should result in a more sustainable mortgage market that works better for consumers and lenders."
Richard Sexton, director of e.surv chartered surveyors, commented:
“First-time buyers are returning to the market in their thousands. Much more high loan-to-value lending, largely as a result of Help to Buy, is helping first-time buyers get on the property ladder after several post-recession years of being stuck on the side-lines. The increase in sales is rippling throughout the entire property market, and total home lending has increased by a third in the last year.
“Many more new buyers are snapping up homes, but the construction of new stock isn’t keeping pace. The result is that the available stock of affordable first-time buyer property is dwindling. If not addressed soon, this will have a knock-on effect on the bottom of the market. Competition for property is pushing purchase prices upwards. If we don’t massively upscale house-building soon, this competition will become yet more intense. Despite the best efforts of Help to Buy, competition for homes could eventually price a whole swathe of buyers back out of the market.”
Henry Woodcock, Principle Mortgage Consultant, IRESS comments:
“The mortgage market is in fine fettle at the moment. First-time buyers are taking advantage of very competitive rates on offer and the increasing choice of mortgage deals without colossal deposits, while the prospect of house price appreciation is drawing demand from new buyers. Equally, buyers benefitted from the scramble from lenders to make use of cheap funds in the Funding for Lending before mortgage lending was no longer eligible for the scheme. As things stand, we expect that the flurry of activity will continue this month as brokers look to clear the decks ahead of the MMR coming into force in April.
“However, there are clouds on the horizon. The MMR’s implementation in April will undoubtedly cause some hiccoughs, while the Budget may see Help to Buy scaled back. If this is the case, the Chancellor must take care not to pull the rug from the housing market recovery too early, especially in regions that have not made the same strides as London and the South East.”
