Boost for home buying and gross lending

Robyn Hall

September 12, 2012

The number of loans taken out by home movers rose by 8% compared to June and by 4% on July last year.

Home movers were advanced 30,500 loans worth £5.1 billion in July, with the increase contributing to a jump in house purchase lending.

This continued an upward trend in house purchase lending following the expected drop in April, linked to the end of the stamp duty concession in March.

A total of 49,500 loans were advanced (worth £7.6bn) marking a 5% rise compared to both June and the same period last year, as well as a 7% rise in value on the previous month.

The effect of this increase was a rise in gross lending.

Gross lending totalled £12.7 billion in July, a 7% increase from £11.9 billion in June and up by 2% compared to July last year.

Lending to first-time buyers remained resilient in July, while not matching the growth shown by home mover lending.

A total of 19,000 loans were advanced to first-time buyers, down from 19,200 in June, but stronger than at the same time last year.

These loans were valued at a total of £2.5bn, a slight increase on the June figure, and the largest monthly total since March when lending was boosted by the end of the stamp duty holiday.

Despite an increase in total lending value and a fall in the number of loans, the median loan size for first-time buyers decreased in July compared to June.

This was caused by an increase in the number of first-time buyers purchasing more expensive properties, with 14% of first-time buyers buying homes worth over £250,000 compared to 12% in June.

At 81%, the average loan-to-value ratio (LTV) for a first-time buyer edged above 80% for the first time in over three years.

This is in contrast to home movers, with borrowers in July taking out 69% of the properties value, compared to an average of 70% observed for almost a year.

Remortgage lending rose slightly in July compared to June, but was 20% down on the same period last year. Lending totalled £3.2 billion in July, up from £3.1 billion in June but still well short of the £4 billion advanced for remortgaging in July 2011.

CML director general Paul Smee said: “July’s figures show a gradual improvement in the market with lending approaching the sort of levels we saw at the end of the stamp duty concession.

“While overall market conditions remain tight, new initiatives such as Funding for Lending and NewBuy have the potential to help lending to continue to ease gradually.”

But Ashley Brown, director of independent mortgage broker, Moneysprite, said: “These latest figures are in stark contrast to what we’re seeing on the ground.

“House-move based transactions are few and far between while lenders come out in a rash even at the sight of a first time buyer. I’m quite frankly baffled.

“From where I’m standing, there’s been less a gradual improvement in the market than a gradual decline.

“There is life in the mortgage market but it’s not where the property market needs it to be in order to fully recover.

“Remortgages and low LTV loans are the only areas where there’s any real activity. Other than that, forget it.

“There has been a fair amount of remortgage activity in recent weeks, as borrowers have reacted to lenders, such as Santander, upping their SVRs.

“Not surprisingly, the vast majority of this remortgage activity has been at lower LTVs.

“The remortgage is one of the only areas I expect to see further momentum in the months ahead.

“The high loan-to-value sector has been stifled by a lack of competition. Even new entrants into the market, such as Metro Bank and Tesco Bank, are apparently allergic to anything above 80%.

“Waiting for the mortgage market to gain momentum is like waiting for Godot.”

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