The figures published by the Council of Mortgage Lenders show that a total of 21,500 loans were advanced to borrowers who moved in February, down by 4% compared to January and a fall of 3% on February last year. By value, home movers were advanced 3.5 billion in February, a 5% fall compared to January.
The number of first time buyers increased by 3% in February, marking the best start to a year since 2008. February figures when combined with those from January reached the largest number of first time buyers in the first two months of the year since 2008.
But overall the picture is gloomier with a dip in house purchase lending due to the fall in lending to home movers and also a fall in lending to those remortgaging.
On top of this other figures published today also shows that house purchase lending is down, falling in March to its lowest since August 2012 despite new initiatives like Funding for Lending.
The data from e.surv chartered surveyors shows that house purchase lending is now 5% weaker than last year and this third monthly fall in a row suggests that the mortgage market is beginning to regress.
The firm’s latest Mortgage Monitor shows that March was the third consecutive month in which house purchase lending has fallen, reversing a trend of five consecutive months of increases in lending between July and December last year. It is the first time since 2008 that house purchase lending has fallen between a February and a March.
The CML data shows that a total of 16,400 loans were advanced to first time buyers in February, up on 15,900 in January and 14,000 at the same time last year. By value, loans to first time buyers totalled £2 billion, the same amount as the previous month, but 18% higher than in February 2012 when it was £1.7 billion.
First time buyers accounted for 43% of all house purchase loans in February. This was the sixth consecutive month that this indicator has been at or above 40%, suggesting that market conditions continue to improve for first time buyers.
The CML said that indicators of loan affordability also suggest that the market was marginally more favourable for first time buyers in February. First time buyers typically borrowed a smaller amount in February than in January, both in absolute terms and relative to their income, typically borrowed 3.19 times their income in February, down from 3.2 times in January, while the average loan to value ratio remained at 80%.
It reckons that this is likely to be associated with a shift towards the purchase of less expensive properties by first time buyers, with a small increase in the proportion of properties bought for less than £125,000.
Remortgage lending remained subdued in February, down compared to both the previous month and February 2012. Some £2.6 billion was advanced to borrowers remortgaging, a 13% fall compared to January when it was £3 billion and 28% lower than February last year when it was £3.9 billion.
‘First time buyers are continuing to take advantage of more favourable market conditions, helping to drive the underlying trend for resilient house purchase lending,’ said CML director general Paul Smee.
‘We hope that the new initiatives announced by the government in the 2013 Budget will further stimulate first time buyer activity but also help those second steppers looking to move into a new or existing home,’ he added.
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said it was encouraging to hear the first time buyer sector was 17% stronger this February than last year, and he believes that the Funding for Lending Scheme (FLS) has succeeded in improving accessibility to the market.
he pointed out that since FLS began in August 2012, the National Mortgage Index has revealed fixed rates have dropped by more than 0.5% across two, three and five year options. ‘With the recent budget announcement promising a further boost to the mortgage market, this is a trend we expect to see continue with fixed rates falling below the 4% barrier by summer 2013,’ he explained.
‘Growing competition in the market has also sparked more choice for consumers, as lenders battle for the best volume. The total number of mortgage products was 4% higher in February 2013 than the previous month, surpassing 9,000 for the first time since December 2011,’ he added.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA) said that it was positive that the number of first time buyers in February was not only higher than the previous month but was also 17.1% higher than this time last year, suggesting such buyers are returning to the market which in turn will encourage others to think about moving.
But more worrying was the fact that overall total number of loans at 37,900 was down on 38,200 recorded in January and despite the Funding for Lending scheme being introduced. ‘The number of home movers and remortgagers has both fallen in February so we are still not seeing a general recovery,’ he said.
He is hopeful that if March figures are stronger then this will give further momentum to the market. ‘With prices still flat in most parts of the UK and low mortgage interest rates there are some grounds for optimism but clearly many would be buyers/movers are still in wait and see mode,’ he added.
