House purchase lending also rose in August. There were 52,000 loans advanced (worth £7.9billion), up from 48,700 (worth £7.2billion) in July and from 51,000 (worth £7.7billion) in August 2010.
House purchase lending is spread across both first-time buyers, and home movers and both contributed to the rise. The number of loans to first-time buyers rose 5% both from last month and August last year, while the value rose by 4% from July and a larger 9% from August 2010.
Home movers took out 33,000 loans in August (worth £5.5billion), an 8% increase (10% by value) on July and up 1% (2% by value) from August 2010. Lending to both first-time buyers and home movers was at its highest for over a year.
Lending criteria for both groups in August showed little change from the previous months. First-time buyers continued to put down on average 20% of their property’s value as a deposit and borrowed 3.20 times their income, slightly up from 3.17 times in July. Typical deposits for home movers stayed at 31% for a second month but in August home movers on average paid 9.4% of their income on mortgage interest payments – the lowest since monthly records began in 2002. This is likely to reflect the low interest rates currently available to borrowers with a large amount of equity, typically home movers.
Some 96% of first-time buyers in August took out a repayment mortgage, unchanged from July and out of 33,000 home movers, 82% (26,900) did the same, up from 80% in July. As existing first-time buyers themselves begin to move home or remortgage, the likelihood is that they will retain a preference for repayment mortgages which will increase the overall popularity of this type of business.
Paul Smee, director general of the CML, said: "Even though it is impossible to ignore the knocks to confidence emanating from the Euro zone, August lending showed welcome signs of life. With those moving house experiencing a record low in the proportion of their income needed to pay their mortgage interest, it is clear that the low rate environment is a benefit to those with mortgages, even against the backdrop of the gloom in the wider economy."
Peter Rollings, CEO of estate agent Marsh & Parsons comments: “The mortgage market has rallied in recent months as homeowners and buyers alike take advantage of the rock-bottom rates available. Borrowers have been cashing in on the chance fix their mortgage onto one of the incredibly affordable long-term deals on the market. But for many, it’s also an excellent time to move, and those with decent deposits can expect remarkably cheap mortgage repayments – at a time when house prices outside of London remain well below their previous peaks. If this trend of improvement in the mortgage market continues, prospective vendors outside the capital can look forward to a growing pool of buyers on the market, and increasing competition for quality properties placed on the market.
In London, there is already strong buyer competition per property as equity-rich buyers and international investors look to London’s bricks and mortar as a financial safe-haven. In fact, we’re currently seeing over 14.7 buyers register for each property listed in central areas. If more and more buyers are able to access larger amounts – on the current cheap rates – this competition will spread out from central and prime areas, boosting activity and sales prices across the city and beyond.”
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