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Pre-Christmas house purchases up 17pc

Sam Cordon

December 12, 2013

In October, 60,800 loans were advanced totalling £9.7bn representing a 24% increase on October 2012. October was the second highest monthly lending amount for home-owner house purchases since November 2007, behind December 2009 which saw a rush of purchasing before the end of the stamp-duty holiday.

First-time buyers received 26,800 loans in October, a 16% increase on the previous month and a 33% increase on October 2012 – totalling £3.7bn.

Next-time buyers were slightly more active receiving 33,900 loans in October, a 19% month-on-month increase, totalling £5.9bn. The number of loans advanced was 16% higher than October 2012.

Paul Smee, director general of the CML, said: “After years of a relatively flat mortgage market, 2013 has shown signs of lending turning a corner and looks set to finish the year strongly.

“Increased financial optimism among the public as the economy recovers seems to be driving this upward trend and it is welcome to see that first-time buyers continue lending momentum as more look to own their first home.”

But month-on-month remortgage activity fell by 12% in October as 28,300 loans were advanced to home owners worth £4.2bn.

Buy-to-let

Landlords received 16,200 buy-to-let loans in October, an increase of 11% on the previous month, the value of which reached £2.1bn.

Of these 8,500 were for purchasing rental properties worth £1bn while remortgages accounted for 7,600 worth £1.1bn – an 11% increase on the previous month, with the difference representing further advances.

The typical first-time buyer income multiple declined slightly with first-time buyers typically borrowing 3.36 times their gross income compared to 3.39 in September.

The typical loan size for first-time buyers was £119,500 in October. This was the highest ever recorded level but, in parallel to this, the typical income of first-time buyer households rose to £36,460, which was also the highest ever recorded level.

The continued downward drift in mortgage interest rates have kept borrowers’ payment burden low. First-time buyers spent 19.3% of gross income to cover capital and interest payments, slightly above the 19.2% in September and close to the lowest recorded monthly figure since 2005 of 19.1% recorded in April 2012 and April 2013.

Affordability

The typical first-time buyer income multiple declined slightly with first-time buyers borrowing 3.36 times their gross income compared to 3.39 in September.

The typical loan size for first-time buyers was £119,500 in October and the average LTV remained unchanged at 80%. This was the highest ever recorded level but, in parallel to this, the typical income of first-time buyer households rose to £36,460 which was also the highest ever recorded level.

The continued downward drift in mortgage interest rates have kept borrowers’ payment burden low. First-time buyers spent 19.3% of gross income to cover capital and interest payments slightly above the 19.2% in September and close to the lowest recorded monthly figure since 2005 of 19.1% recorded in April 2012 and April 2013.

Home movers’ income multiple remained unchanged month-on-month at 2.97 times gross income while the average LTV also remained unchanged at 80%. Home movers spent 8.7% of their income on interest payments and 18.5% on capital and interest payments.

Jonathan Harris, director of mortgage broker Anderson Harris, said: “Record low mortgage rates are ensuring that affordability is not an issue but it is important to remember that interest rates will rise at some point so it is vital that borrowers can afford any lending they take on.

“Long-term fixed rates of five years look extremely good value at the moment and will protect borrowers from interest rate rises for the medium term. While we don’t expect interest rates to rise in the short term, even if there is a significant drop in unemployment, as the economy is too fragile over three to five years a rate rise could well be on the cards so it’s important to plan accordingly.”

John Bagshaw, corporate services director of Connells Survey and Valuation, said: “After a year of records this is confirmation of an upwards trajectory for the housing market. Our data shows that valuations to first-time buyers has already surpassed August 2007 levels and this momentum looks set to carry through to the New Year. Help to Buy is helping thousands of buyers overcome huge obstacles created by wage freezes, inflation and lower saving rates to realise their dreams of buying property – and the housing market is thriving as a result.

“This isn’t just a resurgence on paper. In most parts of the UK new business is coming back thick and fast. To keep pace with demand we’re investing £6m in a plan to boost surveyor headcount by 30% over the course of 2014.

“The property market has come back to life and it’s starting to take the rest of the economy with it too.”

Paul Hunt, managing director of Phoebus Software, said: “The mortgage market has made huge steps towards recovery. Crowds of first-time buyers have returned creating a dramatic improvement in the market as shown by a substantial uplift in activity.

“Although the Funding for Lending Scheme may have been scrapped lending will continue to rise in 2014 thanks to the Help to Buy scheme which will be the main force in driving the market forward. While more attractive deals come to the surface, I expect further signs of recovery to lending levels in the New Year.”

Andy Frankish, new homes director at the Mortgage Advice Bureau, said: “Consumers rode a growing tide of purchase lending in October with the total number of loans advanced up 17% since September and 24% year-on-year. As demand rises along with lenders’ appetites the housing market has been injected with a new dose of confidence and looks to be sustaining the upwards trajectory seen throughout the year.”


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