Mortgage lending highest since 2008
Despite a seasonal monthly fall from 45,900 loans in December to 38,300 in January, advances have risen by 3,700 compared to January 2012.
Paul Smee, CML director general, said: “Seasonal factors clearly had an impact on lending figures in January but it still remains the best start to a year since 2008.
“Mortgage finance is available and lenders are open for business allowing more borrowers to take the step into homeownership or move house in line with their needs.”
House purchase lending
By value house purchase lending totalled £5.7bn compared to £5.2bn in January last year and £6.9bn in December 2012.
Continuing the underlying trend for increased house purchase lending January marked the best start to a year since 2008 – when 47,800 loans were advanced.
Ashley Brown, director of independent mortgage broker Moneysprite, said: “The strongest start to a year since 2008 for house purchases is exactly the news the property market needed to hear. Now let’s hope it kicks on from here.
“And despite early doubts about the effectiveness of the Funding for Lending Scheme it’s now the main reason why lenders are offering more competitively priced products and most crucially at the first-time buyer end of the market.”
Both first-time buyer and home mover lending contributed to the rise in January compared to the same time last year but the increase in lending to first-time buyers was proportionately higher.
A total of 15,900 loans, worth £2bn, were advanced to first-time buyers in January, up by 24% compared to January last year but an 18% fall from December 2012.
This year on year uplift is the largest January total since January 2008 when 17,700 loans were advanced.
And for the third consecutive month first-time buyer activity accounted for 42% of all house purchase loans suggesting that the market remains more favourable for first-time buyers.
There was also a slight shift towards cheaper properties among first-time buyers with a small increase in the proportion of properties bought for less than £125,000. This increase is likely to reflect monthly variation and is largely in line with recent months.
Associated with this, first-time buyers typically borrowed a smaller amount in January than in December both in absolute terms and relative to their income. First-time buyers typically borrowed 3.2 times their income in January, down from 3.28 times in December and 3.23 in January last year.
The average loan-to-value remained at 80% for first-time buyers in January – essentially unchanged for over two years.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “January is never the busiest month of the year for the housing market as it tends to get off to a slow start after Christmas and the New Year but the numbers look particularly good when compared with previous Januarys suggesting recovery is underway.
“Encouragingly there are more first-time buyers around helping boost these numbers which is crucial to the health of the housing market. They are still putting down a 20% deposit, on average, and with the Funding for Lending Scheme making more deals available at 90% loan-to-value this should further increase the number of first-time buyers able to get on the housing ladder in coming months.”
A total of 22,300 loans, worth 3.7bn, were advanced to home movers in January. This was a 3% rise, by both number and value, compared to January last year but a 16% fall from December.
Following a similar trend to first-time buyer activity the number of loans advanced to home movers in the first month of the year reached its highest point since January 2008.
In January £3bn was advanced for remortgaging which represented an increase of 3% on December 2012 (£2.9bn) but still 23% lower than January last year (£3.9bn).
Remortgage lending remains subdued but it now appears to have stabilised at this lower level after falling sharply throughout 2012.
Ben Thompson, managing director of Legal & General Mortgage Club, said: “It is clear that we are at a crucial stage of the housing market recovery. We have seen a variety of data suggesting that the market is flattening out as a prelude to a slow and steady climb back to something which could be termed normality.
Thompson said L&G’s own data in conjunction with Cebr shows that the value of the average home is expected to return to pre-crisis levels of £227,000 by the year 2015 and to reach £254,000 by 2017.
Thompson added: “The challenge now is for the chancellor to encourage this tentative recovery as much as possible in the Budget. Whether through mortgage innovation, mortgage insurance, a change in stamp duty rules or a combination of all three we simply need to help the very welcome but fragile recovery that FLS has stimulated.”
Harris said: “It is too early to call whether FLS is a success or not so a knee-jerk reaction in the form of forcing lenders to do more lending to small businesses rather than mortgage borrowers might be a mistake. We have been seeing a mortgage price war as a result of the FLS and that has been positive.
“Positioning in the best buy tables or on price comparison sites is important to lenders and cutting rates helps achieve this, even if fees have to edge higher to make such low rates possible.”
He added: “Funding for Lending is helping lenders offer ever lower rates but admittedly it is making already very cheap mortgages even cheaper. There are signs that it is helping the higher LTV products but only slightly and more rippling needs to happen.
“That should come as demand for the lower LTV products fails to keep up with supply and lenders start hunting for business in higher LTV bands.”
David Whittaker, managing director of Mortgages for Business, said: “The figures are encouraging but let’s not get too carried away. One relatively strong month of lending to first-time buyers isn’t a sign of a systemic improvement in the mortgage market over the long-term. “Although rates have fallen to historic lows the big deposits lenders require from borrowers in order to access them means plenty of potential buyers are still being left high and dry.”
He added: “It’s like dangling a carrot only to whip it away again at the last minute. Until criteria eases and deposit requirements fall on first-time buyer mortgages the owner-occupier market will remain subdued.”