Gross lending up 29pc year-on-year

Robyn Hall

September 12, 2013

The growth in lending was primarily driven by house purchase lending which rose 9% on June and 21% on July of the previous year.

This took the amount of home purchase transactions to 57,400 valued at £9.1bn, an increase of 12% on June and 23% compared to July last year.

Homemovers out-paced first-time buyers in July with an increase of 12% on the previous month taking the number of advances to 32,000 and 9% increase on July 2012.

First-time buyer growth lagged behind with 5% growth bringing the total monthly transactions to 25,300 although this still represented a 41% increase on July last year.

Paul Smee, director general of the CML, said: “The notable feature is the catch-up in home mover activity. For only the second time this year the monthly growth of movers exceeded the growth in first-time buyers. This is a positive sign of a mortgage market where obstacles to transactions are now reducing.”

The typical first-time buyer loan size stayed almost unchanged from June at £117,038, while average first-time buyer household income increased to £36,142 from £35,873 in June.

Affordability improved marginally in July compared to June reflecting the average loan size remaining largely unchanged but a higher income average alongside a further fall in typical interest rates.

Typically first-time buyers in July borrowed 3.31 times their income in comparison to 3.33 in June and mortgage payments based on capital and interest accounted for 19.2% of income down from 19.3% in June.

In comparison the percentage of income spent on mortgage payments by home movers remained relatively similar to June 2013 increasing from 18.2% to 18.3% in July.

But this was a decrease in comparison to July 2012 when it was 19.3%.

Lending to home-owners for remortgaging increased by 9% in July compared to June but still remained subdued compared to historical volumes. In total £3.8bn was advanced in July to home-owners for remortgages which represented a 9% increase in value on June and a 15% increase on July last year.

Remortgage activity reported by the CML is likely to increase in the coming months as the Bank of England approvals data showed a 40% increase in July.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “First-time buyers are finding it easier to get a mortgage as Funding for Lending and Help to Buy push down rates across the loan-to-value curve. “While property prices continue to rise in parts of the country, fuelling fears of a house-price bubble, this is not yet affecting affordability which improved marginally.”

Harris said this is an encouraging sign as the average loan size has remained unchanged and income multiples have dropping slightly so that many of those getting on the property ladder for the first time are not over stretching themselves.

Richard Sexton, director of e.surv chartered surveyors, said: “Now more than ever the government needs to make a concerted effort to jumpstart the stalled house building sector. Not enough homes are being built.

“We are an island nation so there are limitations to where we can build. But the population is growing and more and more buyers are coming onto the market and competing for a limited supply of property. If it wants to avoid inflating a house price bubble the government needs to get more houses built.”

Andy Knee, chief executive of LMS, said: “Evidently an increasing number of people are taking advantage of the current deals and making that first big step onto the property ladder.

“Although rising house prices could appear intimidating to those looking to buy their first property mortgage repayments can actually prove to be a cheaper option than renting while rates are so low. If you are able to source that all important deposit and you have found a property that you like then now is a good time to take the leap.”

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