By Daniel Hunter
The number of loans advanced to first-time buyers in October returned to levels similar to those seen over the summer following a slow September, according to new data released today by the Council of Mortgage Lenders.
Lending to home movers also increased, contributing to a jump in house purchase lending. Remortgage lending, while still relatively modest, reached its highest level in 6 months.
A total of 20,000 loans were advanced to first-time buyers in October, a rise of 14% compared to last month and up by 19% compared to this time last year. In total, loans to first-time buyers were worth £2.5 billion in October, up on the £2.2 billion in September and the £2.1 billion advanced at the same time last year.
At 80%, the average loan-to-value (LTV) ratio was unchanged in October compared to August and September — this figure has essentially remained static for the last two years.
First-time buyers continued to favour properties priced between £125,000 and £250,000 in October, with 49% buying properties in this band. The percentage of income consumed by initial mortgage interest and capital repayments was unchanged at 20.0%, remaining more favourable than in 2007 when total capital and interest payments typically consumed closer to 25% of first-time buyer income.
Loans to first-time buyers accounted for 40% of all house purchase loans in October for the second consecutive month.
Following weakness in remortgage activity for most of the year, remortgage lending increased for the second consecutive month in October. Remortgage lending totalled £3.5 billion in October, up from £3.2 billion in September but remains low compared to historical levels and was 10.3% lower than October last year (£3.9 billion).
The small up-tick in remortgage lending suggests that the Funding for Lending scheme may be starting to have an early effect on remortgage lending, after subdued activity early in the year. The scheme has the potential to boost remortgage lending activity more quickly than house purchase due to the longer lag time in buying a property.
"More positive figures in October, after a slow September, suggest that the underlying trend in house purchase lending of modest year-on-year growth will continue. However, usual seasonal factors may act as a counter to lending levels in the coming months," CML director general Paul Smee said.
"An up-tick in remortgage lending may be an early sign of a small positive impact of the Funding for Lending scheme, but it’s still too soon to evaluate the effects of the scheme.
"If the incremental improvements in house purchase lending that we are currently seeing persist as we expect them to, then next year should feel a more stable and positive year in the housing and mortgage markets."
Join us on