The £8.4 billion of lending for house purchase accounted for 57% of all mortgage lending in May by value while remortgaging at £4 billion accounted for 27%, and other lending, including lifetime, buy to let and further advances, at £2.3 billion accounted for 16%.
There was a marked increase in lending to first time buyers. The number of mortgages to first time buyers in May reached 25,100, some 29% higher than in April, and 42% higher than in May last year.
First time buyers accounted for 45% of all loans for house purchase, similar to the levels of the past few months but considerably higher than the 38% seen on average since 2007.
The number of first time buyer loans was the highest monthly figure since late 2007, and a marked contrast to the low point of just 8,500 loans in January 2009. By value, first time buyer lending reached £3.4 billion in May, up from £2.5 billion in April and £2.2 billion in May last year.
The CML said that for some months there has been an increase in the number of first time buyers entering the market with smaller deposits and this has now resulted in a shift in the average first time buyer loan to value ratio rising to 83%, up from 81% in April and the highest ratio since November 2008.
First time buyers are also typically borrowing more at £113,400 in May, on average, compared with £110,000 in April and £105,000 in May last year, and typically now have higher incomes at £35,700 in May, up from £33,500 in May last year. The age of the typical first time buyer remained at 29.
The number of loans to home movers in May was up by 32% on April, an increase similar to that among first time buyers, but unlike the first time buyer market the number of home mover loans rose by a more modest 4% compared with May last year. And, in contrast to the shift in first time buyer loan profile, movers have experienced far less change in average loan size, income, or loan to value.
‘Although monthly lending is still running at far less than half its typical monthly level during the peak, there is no doubt that the mortgage market is firmly open for business. Both the borrowing appetite of first time buyers, and the availability of attractive mortgages for them, have improved markedly since a year ago,’ said Paul Smee, director general of the Council of Mortgage Lenders.
‘What is interesting is that, in contrast to some recent assertions, this is happening in parallel with the strengthening buy to let market. It is perfectly possible for both the buy to let market and the first time buyer market to improve at the same time, as the evidence clearly demonstrates,’ he explained.
‘It is important that the supply of housing steps up, as increased housing supply is a crucial factor in ensuring that housing is affordable over the long term,’ he added.
Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB), said thagt the figures from the CML suggest a genuine rebirth of the first time buyer market. 'Help to Buy has started with a bang and made one of the biggest impacts of any government initiative in recent memory on the first time buyer market, despite being open to other home buyers,' he pointed out.
'Generous criteria are tempting many would be home owners to take advantage of the scheme. We now need more lenders to step up so that pricing stays competitive and the market doesn’t become over reliant on a core group of lenders. Lending figures should continue to grow in the months ahead with new mortgage applications up by 43% in May compared to May last year. Average fixed rates are staggeringly low compared to what was considered normal just two years ago, so there is no reason why this mortgage frenzy should cool off any time soon,' he added.
David Whittaker, managing director of Mortgages for Business, said that mortgage availability has improved enough to create a buzz in the first time buyer market. 'Confidence is returning, with lenders, investors and owner occupiers increasingly bullish about the UK’s economic outlook. The return of first time buyers is particularly welcome news and will help rebalance the market away from an over reliance on wealthier buyers. First time buyers are the lifeblood of the housing market, without them the whole property chain is sluggish,' he explained.
But he also pointed out that firsttime buyer levels are still fairly low by historic standards and are particularly low outside of London and the South East. 'It is still difficult to save for a deposit, which is keeping demand very healthy in the rental sector. Supply of homes continues to fall way short of that demand, both in the rental and owner occupier sectors, which is keeping yields high for buy to let investors,' he added.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), believes that it is encouraging to see the surge of lending in CML’s latest figures which suggests that first time buyer and buy to let activity can prosper side by side.
'But what we must avoid is the creation of a two tier housing market where property ownership becomes the preserve of the lucky few who can save for a deposit or borrow funds from relatives, while those less fortunate are left to bear growing rental costs,' he said.
'The shift towards higher loan to values shows that lenders are pushing back against restrictive capital requirements and finding ways to help more people onto the property ladder. The Help to Buy mortgage guarantees should improve things further, so the pressure is on George Osborne to unveil a detailed proposal that lives up to expectations,' he explained.
'Rather than weighing lenders and brokers down with excessive guidance on affordability, the Chancellor George Osborne should trust the rules set out in the Mortgage Market Review (MMR) and focus instead on ensuring fair pricing, effective administration and capital relief. It is vital that specialist lenders are supported alongside mainstream banks so as not to unbalance the market,' he added.