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House purchase lending up slightly in May - CML PDF Print E-mail
Tuesday, 14 July 2015

Lending levels recovered in May compared to April, but were down compared to a year ago, first-time buyers saw a decline in lending volumes compared to last year, but up slightly on the previous month.

Home mover lending saw a similar trend with volumes up slightly on April but down year-on-year, home-owner remortgage activity declined compared to the previous month and compared to the same period last year.

Buy-to-let continues to grow year-on-year, mainly driven by remortgage activity, but also saw a slight month-on-month increase due to higher buy-to-let house purchase lending activity.

Paul Smee, director general of the Council of Mortgage Lenders (CML), commented:

“House purchase lending in May was slightly up on the previous month, suggesting the market might be waking up after a subdued first quarter. Activity has broadly been down on last year but we expect it to rise in the summer months as, with historically low interest rates and a competitive lending environment, borrowing conditions are relatively favourable. But we cannot ignore the continuing affordability constraints caused by high house prices relative to earnings which will work in a contrary direction.“

As previously reported, gross lending in May was £15.9bn, up from £15.8bn in April but down from £16.8bn in May last year.

Lending for house purchase and remortgage  

The number of loans and value for home-owner house purchase remained steady in May, showing a slight month-on-month increase, but was down compared to a year ago.

The typical income multiple peaked in May 2014 with the average mortgage loan equating to 3.28 times gross income. It has since trended downwards and currently stands at 3.17.

Overall, the value of home-owner loans for house purchase accounted for 53% of gross lending, while remortgage activity accounted for 23%. Home-owner loans as a share of gross lending has increased since the new year while remortgage activity has edged down.

Competitive mortgage rates mean first-time buyers are paying a record low proportion of their monthly income to service the capital and interest rate payments of their mortgage. This is the lowest level since we began tracking this in 2005.

The amount of monthly gross household income spent to pay capital and interest repayments was 17.7%, down on last month and the same period last year. Like first-time buyers, this is the lowest it has been since we began tracking this data in 2005.

Remortgage activity fell 10% in both amount borrowed and volume of loans in May compared to April. It also dipped in comparison to May last year continuing the relatively subdued home-owner remortgage activity levels seen since around 2009.

Lending for buy-to-let

Overall, gross lending for buy-to-let in May showed little change on April. But it was up on May last year, reflecting increased levels of remortgage activity in the buy-to-let sector seen since the beginning of the year.

(Source - CML Press Release)  


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