Mortgages in the UK reach their highest level for a January since 2008

House purchase lending recorded its highest January total since 2008, according to new data released today (Thursday 14 March) by the Council of Mortgage Lenders.

Despite a seasonal monthly fall, house purchase lending increased by 11% compared to January last year, the figures show.
First time buyer and home mover are driving this increase and increased compared to January last year, while remortgage lending was still 23% lower than at the start of 2012.

A total of 38,300 loans were advanced for house purchase in January, down on the 45,900 taken out in December, but an increase from the 34,600 loans advanced in January last year.

By value, house purchase lending totalled £5.7 billion, compared to £5.2 billion in January last year, and £6.9 billion in December 2012.

The CML said that the figures show that the underlying trend for increased house purchase lending is continuing and January marked the best start to a year since 2008 when 47,800 loans were advanced.

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 £2 billion were advanced to first time buyers in January, up by 24% compared to January last year but an 18% fall from December 2012. It was the largest January total since January 2008 when 17,700 loans were advanced.
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 ratio remained at 80% for first time buyers in January and is essentially unchanged for over two years.

A total of 22,300 loans worth 3.7 billion 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, £3 billion was advanced for remortgaging, an increase of 3% on December 2012 but still 23% lower than January last year. Remortgage lending remains subdued but it now appears to have stabilised at this lower level, after falling sharply throughout 2012.

‘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,’ said CML director general Paul Smee.

According to David Whittaker, managing director of Mortgages for Business, 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,’ he said.

‘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. It’s like dangling a carrot, only to whip it away again at the last minute. Until criteria loosens and deposit requirements fall on first time buyer mortgages, the owner occupier market will remain subdued,’ he explained.

‘Landlords shouldn’t be too concerned. First time buyer lending is less than half of what is was in 2007, which is keeping demand for rented accommodation very fierce indeed. Rates on buy to let deals have fallen in the past six months, and we’re seeing more investors refinancing in order to expand their portfolios to take advantage of healthy gross yields in the buy to let sector,’ he added.

Richard Sexton, director of e.surv chartered surveyors, said the data shows that life is becoming easier for first time buyers. ‘Although deposit requirements are still high, rates are lower and banks are more willing to lend to lower income borrowers. High LTV lending rose in January and accounted for one in eight of all house purchase loans, compared to one in 12 six months ago,’ he pointed out.

‘The market is showing remarkable resilience to the wider problems in the economy. Funding for Lending can take some of the credit: it is plugging the punctures in the mortgage market and stopping it from falling flat,’ he said.

He added that the thinks the government’s is right to propose an extension of the Funding for Lending scheme. ‘It will help brace the mortgage market against the effects of austerity, and will provide a cushion against funding squeezes, which will encourage banks to sustain lending levels even if economic growth continues to stunt. But telling lenders to focus the cheaper funds on SMEs, rather than on mortgage lending, would be a real blow to the housing market,’ he added.