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Home arrow News arrow Europe arrow CML records a further rise in loans to crucial first time buyer market in the UK

CML records a further rise in loans to crucial first time buyer market in the UK

Wednesday, 16 January 2013
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House purchase activity increased in the UK driven by a rise in first time buyers, according to the latest data report from the Council of Mortgage Lenders published today (Wednesday 16 January).

Increased activity among home movers was also recorded, leading to an overall 6% rise in the number of loans for house purchase in November 2012 but remortgage lending was down against the previous month and the same period in 2011.

The number of loans taken out by first time buyers reached the largest monthly total since the end of 2009, except for March when the end of the stamp duty holiday boosted activity.

A total of 21,700 loans were advanced to first time buyers in November, worth 2.7 billion, representing an 8% rise compared to October and up by 24% on November last year.

For the second consecutive month, loans to first time buyers accounted for 41% of all house purchase loans, rather higher than the usual proportion of around 38%.

Indicators of loan affordability remained stable in November, with the median loan to value (LTV) ratio staying at 80% while the percentage of income consumed by initial interest and capital repayments was unchanged at 20%.

A total of 31,100 loans worth ã5 billion were advanced to home movers in November, representing a 5% increase compared to October and up by 6% on the same period in 2011.

Home movers typically borrowed 2.86 times their income in November, down from 2.9 in October, while the percentage of income consumed by initial interest and capital repayments ticked down to 19.1%.

As a result of the rise in loans to first time buyers and home movers, total house purchase lending increased in November.
A total of 52,700 loans were advanced in the penultimate month of the year, up by 13% compared to the same period in 2011, and up by 6% compared to October. By value, house purchase loans were worth 7.7 billion in November, a rise of 10% on November last year and 4% compared to October.

Remortgage lending fell in November, continuing to run below year earlier levels. A total of ã3.2 billion was advanced, down from 3.5 billion in October and 26% lower than the same period in 2011.
 
ÑEncouraging activity in the first time buyer sector in November contributed to an uplift in house purchase lending suggesting that the underlying trend for year on year increases should continue, said CML director general Paul Smee.

ґWe expect the Funding for Lending scheme to continue to encourage a downward drift in interest rates. This may prompt an increase in remortgage activity as borrowers seek to take advantage of lower rates, he added.

Paul Hunt, managing director of Phoebus Software said that the increase in first time buyer activity will send a positive wave of confidence through the property market. 'The number of first time buyer loans climbed above expectations in November while home mover loans also increased. Challenges undoubtedly remain, but we are seeing strong signs for the year ahead as indicators of loan affordability remain robust and the Funding for Lending scheme is reducing some of the side effects felt by a lethargic economy,' he added.


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