The number of loans was up 17% in volume in October compared with the previous month and property commentators said it is a sign that the UK housing market is well on the way to recovery.
Crucially, loans to first time buyers were also up, recording a rise of 16% compared to September and up 33% compared to October 2012, reaching the highest number of loans in a monthly period since November 2007.
The number of loans advanced to home movers increased 19% in volume compared to September and was up 16% compared to October last year while the number of loans advanced to home owner remortgagors fell in October compared to September and fell year on year.
Overall, 60,800 loans were advanced in October with a total in value of £9.7 billion, the second highest monthly lending amount for home owner house purchase since November 2007, behind December 2009 when volumes that month were inflated by the impending end of the stamp duty holiday.
The data also shows that 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, 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 CML points out that 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.
Lending for buy to let increased in October with 16,200 buy-to-let loans advanced, which was up 11% in volume compared to September. The value of these loans totalled £2.1bn, which was an increase of 10.5% from September.
Buy to let lending for house purchase also grew in October, up 11.3% compared to September. The loans totalled in value £1 billion, an increase of 14.9% compared to September. Buy to let remortgage lending also increased in October, up 11% compared to September with a total value of £1.1 billion.
‘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,’ said Paul Smee, director general of the CML.
David Whittaker, managing director of Mortgages for Business, said that the figures show that over the course of 2013 the property market has gradually picked up speed. ‘Demand is ticking upwards steadily, and this is good news for every aspect of the property industry. Supply from new building projects is taking longer to respond but the incentives are here and activity across the board is going in the right direction,’ he pointed out.
‘Landlords in particular have benefited from lower mortgage rates than a year ago and as the financial world gains confidence in the recovery the availability of more complex buy to let finance is steadily rising too. In 2014 I expect finance will become easier to access and more flexible, while demand for property seems set to keep on growing,’ he added.
According to Paul Hunt, managing director of Phoebus Software, the mortgage market is making 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. The figures show high LTV lending has doubled compared to a year ago, a sign that lenders have been proactive in their approach to lending. They have given the support to help a range of buyers, including those with small deposits, in the form of attractive mortgage deals and cheaper rates,’ he said.
‘It’s clear the mortgage market will continue to flourish, thanks to the major boost from the bottom up that will make the whole market more fluid. 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,’ he added.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), believes that the market is now stronger and better equipped to meet pent up demand from first time buyers, as well as smoothing the path of home movers looking to scale the housing ladder.
‘We have now seen over £50 billion of gross lending in the three months to October and with the closure of the Funding for Lending Scheme (FLS) for mortgages in 2014 there is every incentive to make as many loans as possible before the year end. Of course this might trigger a lull early next year but there is an extra kick to come when the gates fully open for lending to applicants through the Help to Buy mortgage guarantee scheme,’ he said.
He pointed out that the lack of movement in the average size of first time buyer loans compared to the value of their homes shows how important it is to support higher loan to value (LTV) mortgages. ‘With challenger banks actively joining high street brands within Help to Buy phase two, we should see more progress on this score from January. This added impetus will be welcome relief for those first time buyers still finding it hard to raise a deposit,’ he explained.
‘Overall, confidence has replaced hope for buyers seeking a mortgage, and the market as a whole is approaching the year end with more optimism than has been the case for many years. Growth of house prices and overall lending remains modest compared to historic levels and the Bank of England has a stronger remit to guard against excess growth. We can expect Bank of England action if it is required,’ he added.
As demand rises along with lenders’ appetites, the housing market has been injected with a new dose of confidence, according to Andy Frankish, new homes director for the Mortgage Advice Bureau (MAB).
‘The launch of the Help to Buy mortgage guarantee in October has made waves among first time buyers and home movers, with many brokers reporting growing interest in getting a mortgage. Even before lending to applicants has begun, it is encouraging to see first time buyers on the receiving end of the most home purchase loans in any month since November 2007,’ he said.
‘Supporting potential buyers to take out a 95% mortgage will help the market return to a normalised state and gives consumers the opportunity to jump on the property ladder without having to scrimp and save for an unrealistic deposit,’ he pointed out.
‘As demand increases, it is vital that the shortage of homes currently available on the market is addressed. We cannot expect change overnight after years of muted activity in the construction industry. But active steps to unblock housing developments and encourage mortgage lending will ensure both first time buyers and existing homeowners can take advantage of the current upward trends,’ he added.
John Bagshaw, corporate services Director of Connells Survey and Valuation, said that the 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,’ he pointed out.
‘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 £6 million 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,’ he added.
