Gross mortgage lending was weighed down by weak remortgage lending in August, despite a strong increase in house purchase lending, according to the latest figures from the Council of Mortgage Lenders (CML). Lending for home purchases increased by 12% compared to July, and by 11% compared to the same period last year. A total of 55,300 loans were advanced for house purchase in August, worth £8.4bn, compared to 49, 500 in July and 49,900 in August 2011, the largest number of loans advanced in one month since the summer of 2010.
Remortgage Lending Weakens, Impacting Overall Mortgage Activity
In contrast, remortgage lending continued its downward trend, accounting for just 22% of gross lending in August, compared to 33% in August last year. Remortgage lending totalled £2.9bn in August, down by almost 33% compared to the same period last year and by over 9% from July. This weakness in remortgage lending weighed down overall gross mortgage lending, which was 2% lower than the same period last year but up slightly compared to the previous month. Gross lending totalled £12.9bn in August, compared to £12.8 bn in July.
First-Time Buyers Drive Growth in August Mortgage Market
Meanwhile, lending to first-time buyers rose by 14% in August compared to July and up by 18% on the same time last year. A total of 21, 600 loans were advanced to first-time buyers, worth £2.8bn, only 2,600 fewer loans than in March when lending to FTBs was elevated by the end of the stamp duty holiday. For the second consecutive month, the average loan-to-value (LTV) ratio for a first-time buyer remained above 80%. At 81%, the LTV ratio is at its highest point in over three years, although it is too early to draw any conclusions about any persistent trends or the impact of the New Buy scheme.
Also contributing to the increase in house purchase lending, a total of 33,800 loans, worth £5.7bn, were advanced to home movers in August. This represented a 10.5% increase on July and a 7% rise compared to August last year. Paul Smee, CML director general, commented: “House purchase lending showed an encouraging rise in August but it’s unclear whether this reflects just the unravelling of previous factors such as the Jubilee and the Olympic Games, or a shift in the underlying picture. “We will wait and see whether schemes such as Funding for Lending and NewBuy provide a further boost to the market in coming months.”
Prospects for Remortgaging Improve as Summer Draws to a Close
While the CML figures clearly show that in August people decided to put off remortgaging and concentrate on enjoy the Olympics and their summer holidays, the MAB Mortgage Index suggests that this will change in September as people look to get on top of their finances, according to Brian Murphy, head of lending at Mortgage Advice Bureau (MAB). He said: “Indeed, we have seen applications for purchase and remortgage borrowing increase by 1.9% since August and they are now 7.9% higher than at the beginning of the year. This trend is set to continue and grow as we approach the end o
Article courtesy of Property Investor Today“”
