With 34,100 loans taken out (worth £4.2 billion), both the volume and value were more than 30% higher than August 2010.
House purchase lending also rose in August. There were 52,000 loans advanced (worth £7.9 billion), up from 48,700 (worth £7.2 billion) in July and from 51,000 (worth £7.7 billion) in August 2010.
Loans for house purchase and remortgage
Number of house purchase loans:
- August 2011: 52,000
- Change from July 2011: 7%
- Change from August 2010: 2%
Value of house purchase loans £m:
- August 2011: 7,900
- Change from July 2011: 10%
- Change from August 2010: 3%
Number of remortgage loans:
- August 2011: 34,100
- Change from July 2011: 9%
- Change from August 2010: 33%
Value of remortgage loans, £m:
- August 2011: 4,200
- Change from July 2011: 5%
- Change from August 2010: 31%
House purchase lending is spread across both first-time buyers, and home movers and both contributed to the rise.
The number of loans to first-time buyers rose 5% both from last month and August last year, while the value rose by 4% from July and a larger 9% from August 2010.
Home movers took out 33,000 loans in August (worth £5.5 billion), an 8% increase (10% by value) on July and up 1% (2% by value) from August 2010.
Lending to both first-time buyers and home movers was at its highest for over a year.
First-time buyers, lending and affordability
Number of loans:
- August 2011: 19,000
- Change from July 2011: 5%
- Change from August 2010: 5%
Value of loans £m:
- August 2011: 2,400
- Change from July 2011: 4%
- Change from August 2010: 9%
Average loan to value:
- August 2011: 80%
- Change from July 2011: 80%
- Change from August 2010: 77%
Average income multiple:
- August 2011: 3.20
- Change from July 2011: 3.17
- Change from August 2010: 3.25
Proportion of income spent on interest payments:
- August 2011: 13.0%
- Change from July 2011: 13.1%
- Change from August 2010: 13.5%
Lending criteria for both groups in August showed little change from the previous months.
First-time buyers continued to put down on average 20% of their property’s value as a deposit and borrowed 3.20 times their income, slightly up from 3.17 times in July.
Typical deposits for home movers stayed at 31% for a second month but in August home movers on average paid 9.4% of their income on mortgage interest payments – the lowest since monthly records began in 2002.
This is likely to reflect the low interest rates currently available to borrowers with a large amount of equity, typically home movers.
Home movers, lending and affordability
Number of loans:
- August 2011: 33,000
- Change from July 2011: 8%
- Change from August 2010: 1%
Value of loans £m:
- August 2011: 5,500
- Change from July 2011: 10%
- Change from August 2010: 2%
Average loan to value:
- August 2011: 69%
- Change from July 2011: 69%
- Change from August 2010: 67%
Average income multiple:
- August 2011: 2.88
- Change from July 2011: 2.87
- Change from August 2010: 2.89
Proportion of income spent on interest payments:
- August 2011: 9.4%
- Change from July 2011: 9.6%
- Change from August 2010: 9.5%
96% of first-time buyers in August took out a repayment mortgage, unchanged from July and out of 33,000 home movers, 82% (26,900) did the same, up from 80% in July.
As existing first-time buyers themselves begin to move home or remortgage, the likelihood is that they will retain a preference for repayment mortgages which will increase the overall popularity of this type of business.
Paul Smee, director general of the CML, commented:
"Even though it is impossible to ignore the knocks to confidence emanating from the Euro zone, August lending showed welcome signs of life.
"With those moving house experiencing a record low in the proportion of their income needed to pay their mortgage interest, it is clear that the low rate environment is a benefit to those with mortgages, even against the backdrop of the gloom in the wider economy."
Charles Haresnape, Managing Director of Aldermore Residential Mortgages, said:
"Although the temptation is for homeowners on SVR deals is to stay put and ride-out the low interest rates, its impossible to know - especially against a backdrop of such a volatile European economy - when rates will start to rise once again.
"Borrowers, especially those on limited budgets, would therefore be well adv
