Home-owner house purchase and buy-to-let lending grew in July

Gross UK mortgage lending rose 12% in July to £16.7billion, up from £14.9billion in June and 29% on last July.

Survey results published by the Council of Mortgage Lenders show that this growth in July continued to be buoyed by home-owner house purchase lending, in particular by growth in first-time buyers.

The CML data (which, as of this month, includes buy-to-let) shows:

* Total home-owner house purchase lending continued to grow, up 9% on June and 21% on July last year; * First-time buyers took out 25,300 loans in July, an increase of 5% on June and of 41% compared to July 2012; * Home movers took out 32,000 loans, an increase of 12% compared to June and up 9% on July last year; * Home-owner remortgage lending continued to pick up compared to July 2012 and recent months, although the £3.8bn advanced remains subdued compared to historical volumes; * Total buy-to-let loans advanced increased to 15,200 in July, up 12% compared to June; * (Within this, 7600 buy-to-let loans in July were for house purchase, up by 7% compared to June; * In contrast to the picture in the home-owner market, buy-to-let remortgage lending grew more strongly than house purchase, increasing by 24% compared to June to £1.1billion.

Total home-owner house purchase loans (both movers and first-time buyers) continued to show the resilience and growth seen throughout 2013. 57,400 house purchase loans were advanced in July, an increase of 9% on June and up by 21% on July last year. These loans had a total value of £9.1billion, which was an increase of 12% on June and 23% compared to July last year.

The strong growth in lending to first-time buyers since the beginning of the year has continued, with the number of loans advanced increasing by 5% compared to June. In July, 25,300 loans were advanced to first-time buyers, worth £3.5billion. By value, first-time buyer lending was 6% up on June and 46% up on July last year.

The typical first-time buyer loan size stayed almost unchanged from June at £117,038, while average first-time buyer household income increased to £36,142 from £35,873 in June.

Affordability improved marginally in July compared to June reflecting the average loan size remaining largely unchanged but a higher income average, alongside a further fall in typical interest rates. Typically, first-time buyers in July borrowed 3.31 times their income in comparison to 3.33 in June and mortgage payments (capital and interest) accounted for 19.2% of income, down from 19.3% in June.

Lending to home movers showed strong growth in July, with 32,000 loans advanced – up by 12% compared to June and 9% compared to July last year. By value, movers borrowed £5.6billion, an increase of 17% compared to June and 12% compared to July last year.

The percentage of income spent on mortgage payments by home movers remained relatively similar to June 2013, increasing from 18.2% to 18.3% in July. However, this was a decrease in comparison to July 2012 when it was 19.3%.

Lending to home-owners for remortgage increased by 9% in July compared to June but still remains subdued compared to historical volumes. In total, £3.8bn was advanced in July to home-owners for remortgages which represented a 9% increase in value on June and a 15% increase on July last year.

Remortgage activity reported by CML is likely to increase in the coming months – Bank of England approvals data showed a 40% increase in July.

Lending for buy-to-let has continued to follow an upward trend, similar to the market overall. 15,200 buy-to-let loans were advanced in July, an increase of 12% compared to June. This represents a value of £2billion which was 11% higher than in June.

Lending for buy-to-let house purchase was up 7% in July compared to June, a total of 7600 loans. The value of these loans was £900million, up 13% from June.

There was strong growth in buy-to-let remortgage lending which increased by 24% in July compared to June, a value of £1.1billion. This equated to 7,200 loans in July for buy-to-let remortgage in total, an increase by 13.4% on June 2013.

Paul Smee, director general of the CML, said: “The notable feature is the catch-up in home mover activity. For only the second time this year the monthly growth of movers exceeded the growth in first-time buyers. This is a positive sign of a mortgage market where obstacles to transactions are now reducing.”

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