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First-time buyer activity up 23% year-on-year – CML
House purchase and first-time buyer loans both rose by almost a quarter year-on-year in January, suggesting lending levels are beginning to rise, according to the CML.
However, the trade body warned there is still likely to be a “bumpy” road ahead for lending, with all loan categories suffering significant drops in activity by comparison to December, as expected for the time of year.
The CML figures showed that there were 35,600 house purchase loans worth £5.3bn in January, up 22% by number and 23% by value compared to January 2011. This was down 25% by volume and 24% in value on December.
Similarly, first-time buyer loans in January increased by 23% year-on-year in both number and value, totalling 13,200 loans worth £1.6bn. However, this was again down 30% from December.
Remortgage and home mover lending also showed year-on-year rises, although not to the same extent as house purchase and first-time buyers.
Remortgages totalled 26,600 in January, worth £3.6bn, an increase of 13% by volume and 5% by value year-on-year, but down 6% and 3% respectively month-on-month.
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Home mover loans totalled 22,400 worth £3.6bn in January. This was up 20% by number and 16% by value compared to January 2011, but down 22% and 23% in number and value on December.
CML director general Paul Smee said: “We traditionally see a substantial fall in lending figures at the start of the year, reflecting the lack of enthusiasm by buyers to move house during the post-Christmas months, and this January has been no exception.
“But the year-on-year rise in house purchase lending suggests that lending levels are generally rising, although we expect the trajectory to be bumpy rather than smooth this year.”
Meanwhile, for the last year, first-time buyers have borrowed an average LTV of 80%, which was unchanged in January, while typical home movers took out mortgages of 70% LTV for the fourth month running.
Smee said: “Average deposits for first-time buyers have stayed steady at around 20% for over a year, but that figure may start to drift down gently over the coming months, especially as NewBuy has been launched for new homes.”
However, Adrian Knott, director of independent mortgage broker Adrian Knott Partnership, said that, while first-time buyers appeared to be bucking the trend, the wider market continues to suffer: “Some of the pain is perfectly avoidable. One factor that is genuinely damaging the property market is the rapid demise of the interest-only loan.
“Lenders are increasingly heading for the hills when it comes to interest-only. There’s a fear factor around interest-only loans that is totally unfounded. By taking the axe to interest-only loans, lenders are cutting off their noses to spite their face.”