Slight growth returns to mortgage lending

Slight growth returns to mortgage lending

There was a glimmer of hope for the housing market in November, as new mortgages and remortgages both rose. Fixed rate mortgages rose to their highest rate of popularity for two years.

Written by Trevor Lloyd-Jones on 16 January 2012


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House purchase lending in November experienced a year-on-year rise for only the second time in 2011, according to the Council of Mortgage Lenders.
 
Loans for house purchase totalled 47,000 (worth £6.9 billion) in November, a 4% rise (5% in value) from October and a 3% rise (5% in value) compared to November 2010. Remortgaging also increased.

There were 31,200 loans (worth £4 billion), up from 29,500 (worth £3.7 billion) in October and 30,700 (worth £3.8 billion) the previous November.

 

Number of
house purchase
loans

Value of house
purchase loans
£ million

Number of
remortgage
loans  

Value of
remortgage
loans, £ million

November 2011

47,000

6,900

31,200

4,000

Change from October 2011

4%

5%

6%

8%

Change from November 2010

3%

5%

2%

5%

First-time buyers took out 17,300 loans, worth £2.1 billion in November, up 4% by volume and 5% by value compared to both October 2011 and November 2010. Home mover loans increased by 5% in volume and 4% in value from October and by 2% in volume and value from a year ago.

While the number of first-time buyers (and indeed all buyers) has declined markedly since the credit crunch, the proportion of loans advanced to first-time buyers has remained remarkably steady, fluctuating between 34% and 40% since 2005. In November, first-time buyers took up 37% of the house purchase market, the same as in October.

First-time buyers, lending and affordability

 

Number of
loans

Value of
loans
£ million

Average
loan to value

Average
income multiple

Proportion of
income spent on 
interest payments

November 2011

17,300

2,100

80%

3.23

12.2%

Change from October 2011

4%

5%

80%

3.20

12.3%

Change from November 2010

4%

5%

80%

3.22

13.0%

First-time buyers continued to see a decline in the proportion of their income accounted for by mortgage interest payments, at in November compared to 12.3% in October and 13% the previous November. Mortgage interest payments for home movers, however, stayed static at 9.2% for the second month, still the lowest proportion in nine years. 

Home movers, lending and affordability

 

Number of
loans

Value of
loans
£ million

Average
loan to value

Average
income multiple

Proportion of
income spent on 
interest payments

November 2011

29,800

4,800

70%

2.89

9.2%

Change from October 2011

5%

4%

69%

2.89

9.2%

Change from November 2010

2%

2%

68%

2.87

9.6%

Fixed-rate mortgages increased in popularity to their highest point in more than two years in November. Some 65% of all borrowers took out a fixed rate, up from 62% in October. This may be because a rise in interest rates seems more likely, although not imminent, and borrowers may want to lock in to current favourable rates.

Repayment mortgages continue to be chosen by the vast majority of borrowers. Some 98% of first-time buyers (up from 97%), 83% of movers (up from 82%) and 79% of remortgagers (up from 77%) took out a repayment mortgage in November.

CML director general Paul Smee commented: "A rise in mortgage lending towards the end of 2011 is a welcome indicator for the industry considering confidence has been weak due to fragile economies both at home and in the Eurozone.

"We should expect a further increase in first-time buyer activity over the next few months as they push through their purchases to take advantage of the stamp duty concession before it ends in March."

For registered users MoneyVista allows you to analyse all your accounts, pensions and other assets in one place and see what they would produce in retirement. You can set your budgets and goals for the year ahead. For related information you can access the MoneyVista guides Homebuyers' guide: sorting out your finances and Homebuyers' guide: how to repay your mortgage early.


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