CML: House purchase lending in August down 3%

New CML data on the characteristics of lending in August show that lending declined slightly compared to July, the first month-on-month drop in house purchase lending volume since February this year.

Related topics:  Mortgages
Amy Loddington
9th October 2014
decline graph chart down decrease drop

House purchase lending to home-buyers decreased month-on-month in August totalling 65,400 loans. This was down 3% compared to July with the value of these loans totalling £11.4bn, a fall of 3%. Compared to August 2013, the number of loans increased by 8% and the value of lending by 19%.    

Lending to home movers also weakened, for the first time in five months. In August, the number of loans advanced to movers was 36,500, a 3% fall on the previous month but up 7% on August last year. By value, lending to movers totalled £7 billion, 3% down on July but up 17% on August last year.

Home movers typically borrowed 3.04 times their gross income in August, compared to 3.03 in July. The typical loan size for home movers was £156,750 in August, up from £155,999 in July. The typical gross household income of a home mover was £54,651 in August compared to £54,434 in July.

Home movers' payment burden remained relatively low in August at 18.8% of gross income being spent to cover monthly capital and interest payments, up slightly from 18.7% in July, but well below the recent peak of 23.8% in December 2007.  

First-time buyer lending declined in August compared to July, with 28,900 first-time buyer loans - 4% fewer than in July but 9% up on August 2013. By value, there was £4.4 billion of lending to first-time buyers - 4% down on July but 22% higher than August last year.

The number of remortgage loans decreased compared to July, down 14% and down slightly by 1% compared to August last year. These loans had a total value of £1bn, down 17% on July but up 4% on August last year.

Remortgage lending activity saw a decrease month-on-month and also year-on-year in August. The number of remortgages in August was 4% down on July and 11% down on August last year. The value of these loans (£3.7 billion) was down 5% on the previous month and down 3% on August last year.

Total gross lending in August was £18.1 billion. This was 8% lower than July (£19.7 billion) but 10% higher than August last year (£16.4 billion), according to the Bank of England.

Paul Smee, director general of the CML, commented:

“The lending climate had a glass half full, glass half empty feel about it in August. On the one hand it saw a decline in all lending types month-on-month, which would suggest a levelling off of the market, with remortgaging remaining flat. Yet, on the other hand, we saw the highest August house purchase lending levels since 2007, and the recent Bank of England Credit Conditions Survey expects an upward trend in remortgaging in the final months of the year. Overall, these figures give no support to any fears of a developing bubble in housing.

"This has been a year of major change, and the market has shown significant resilience and responsiveness to the changing environment, improving the availability of lending without compromising financial stability, as the Bank of England's assessment last week highlighted."

David Newnes, director of Your Move and Reeds Rains, comments:

“The mortgage market was jolted back into renewed vitality this year, but the more recent period of recalibration has shifted lending conditions. Securing mortgage finance is not a conundrum restricted to first-time buyers, but is a considerable hurdle for landlords too. Demand for rented accommodation is climbing, and there’s little sign of this stopping.

“Secure house prices and spirited tenant demand are encouraging budding buy-to-let investors and existing landlords to add to the number of available homes to let. Balancing the asymmetry between supply and demand depends on the growing number of buy-to-let investors being able to acquire affordable mortgages, in order to broaden the pool of rental accommodation on offer and keep rent rises at sustainable levels.
"The government and Bank of England need to ensure that any further regulatory changes do not lift lending out of reach for good applicants, and destroy growth at the same time. The benefits of more investment will be felt in tenants’ back pockets at the end of the month, as the strain of rent rises eases further.”

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