Mortgage lending sees best January since 2008. First time buyers still doing better than others.

14th March 2013

Mortgage lending this January saw its highest first month of the year since 2008, according to lenders’ trade body the Council of Mortgage Lenders. Despite a seasonal monthly fall, house purchase lending increased by 11 per cent compared to January last year.

First-time buyer and home mover activity rose compared to January last year, while remortgage lending was still 23 per cent lower than at the start of 2012.

House purchase lending

The CML says a total of 38,300 mortgages were advanced in January, down on the 45,900 taken out in December, but an increase from the 34,600 loans advanced in January last year. By value, house purchase lending totalled £5.7 billion, compared to £5.2 billion in January last year, and £6.9 billion in December 2012.

The CML says January marked the best start to a year since 2008 – when 47,800 loans were advanced

Table 1: Loans for house purchase and remortgage

Number of house
purchase loans

Value of house
purchase loans, £m

Number of
remortgage loans

Value of remortgage
loans, £m

January
2013

38,300

5,700

22,500

3,000

Change from
December 2012

-16.6%

-17.4%

3.2%

3.4%

Change from
January 2012

10.7%

9.6%

-22.9%

-23.1%

The CML says a total of 15,900 loans worth £2 billion were advanced to first-time buyers in January, up by 24 per cent compared to January last year with 12,800 loans, but an 18 per cent fall from December 2012  with 19,500 loans.

It was the largest January total since January 2008 when 17,700 loans were advanced. For the third consecutive month, first-time buyer activity accounted for 42 per cent of all house purchase loans, suggesting that the market remains more favourable for first-time buyers than others.

There was also a slight shift towards cheaper properties among first-time buyers with a small increase in the proportion of properties bought for less than £125,000. This increase is likely to reflect monthly variation and is largely in line with recent months.

The CML says first-time buyers typically borrowed a smaller amount in January than in December – both in absolute terms and relative to their income. First-time buyers typically borrowed 3.2 times their income in January, down from 3.28 times in December and 3.23 in January last year.

The average loan-to-value ratio remained at 80 per cent for first-time buyers in January – essentially unchanged for over two years.

Table 2: First-time buyers, lending and affordability

Number of loans

Value of loans £m

Average loan to value

Average income multiple

Proportion of income spent on interest payments

Proportion of income spent on capital and interest payments

January
2013

15,900

2,000

80%

3.20

12.8%

19.8%

Change from
December 2012

-18.5%

-20.0%

80%

3.28

13.2%

19.9%

Change from
January 2012

24.2%

25.0%

80%

3.23

12.2%

19.2%

Home movers

A total of 22,300 mortgages worth 3.7 billion were loaned to home movers in January. This was a 3 per cent rise by both number and value compared to January last year, but a 16 per cent fall from December.

Following a similar trend to first-time buyer activity, the number of loans advanced to home movers in the first month of the year reached its highest point since January 2008.

Table 3: Home movers, lending and affordability

Number of loans

Value of loans £m

Average loan to value

Average income multiple

Proportion of income spent on interest payments

Proportion of income spent on capital and interest payments

January
2013

22,300

3,700

70%

2.86

9.6%

18.9%

Change from
December 2012

-15.5%

-15.9%

70%

2.90

9.9%

19.0%

Change from
January 2012

2.8%

2.8%

70%

2.94

9.6%

19.1%

Remortgage lending

In January, £3 billion was advanced for remortgaging, an increase of 3 per cent on December 2012 or £2.9 billion but still 23 per cent lower than January last year £3.9 billion.

Remortgage lending remains subdued but it now appears to have stabilised at this lower level, after falling sharply throughout 2012.

CML director general Paul Smee says: “Seasonal factors clearly had an impact on lending figures in January, but it still remains the best start to a year since 2008. Mortgage finance is available and lenders are open for business, allowing more borrowers to take the step into homeownership or move house in line with their needs.”

20 thoughts on “Mortgage lending sees best January since 2008. First time buyers still doing better than others.”

  1. Anonymous says:

    Hi Shaun
    My fear is that this will turn out to be another pre election boom. Does this mean that we will face an economic hangover once the General Election is done and dusted next year? Still fingers crossed for better times.

    1. Anonymous says:

      Hi KimJosephine

      For now things look strong for the UK economy and that momentum will take us through the summer and into the autumn of 2014. Beyond then in these uncertain times it gets very hard to say.

  2. Just a thought says:

    Hi Shaun,
    Are we witnessing the Plato’s cave allegory???

    https://www.youtube.com/watch?v=RoOVFO4Qnqg

    1. Anonymous says:

      Hi Justathought

      Thanks for the link and I suspect that Plato’s analogy is indeed in play. Just one thing could you please find a version next time which avoids the profanity as I like to keep this blog clean of such things…

  3. Noo 2 Economics says:

    Hi Shaun,
    You may remember I have been banging on about expected higher wage increases this Spring since about last November.

    Unfortunately, I am worried now because this is arriving a bit earlier than I expected. The reason I expected it is because I reject the mythical output gap despite current unemployment levels, which explains “Starting salaries and hourly pay rates are up as employers battle to entice the talent they need”.

    This is inflationary when you consider productivity per capita has fallen 15% since 2007 and there has been no great increase in business investment (and exactly what has the Government been doing about training/re-training the unemployed??).

    Looking at M1 growth and increasing wages which I believe will pace inflation by year end, I am now predicting inflation to start edging up from April or May onwards and we should see about 2.5% CPI by year end assuming GBP doesn’t appreciate further (by the way I believe GBP is overvalued and needs to fall about 17 cents against the US dollar to achieve it’s “true” value) and the BOE doesn’t raise interest rates.

    Beyond that, 2015 election year doesn’t look too good to me – inflation moving to 3% and GDP growth maintaining about 2.5% or slowing a little preparing for a slowdown in the latter half of 2015 or if the Government are lucky, early 2016. So pre-election boom probably but it may yet turn into a pre-election downturn as I suspect they may have turned on the money taps a little too early.

    So my overall comment is disinflation! what disinflation? – We’ll see in the next 3 months…

    1. Anonymous says:

      Hi Noo2

      Under ordinary UK economic history we would now be seeing a pick-up in inflation. But the bulwark against that has been the rise in the value of the pound £. This evening it has touched US $1.68 and whilst this represents dollar weakness today the pound has been strong for a while now on its own. Whilst our economy looks strong this is likely to remain true. So your scenario could get more cataclysmic if a weakening rate of growth sees the pound fall which will feed into imported inflation.

      As to the employment issue the REC report I mentioned also said this.

      “We have a core group of long-term unemployed people whose skills don’t fit with current vacancies and are unable to access the jobs market.”

      We need to try harder to do something about this.

      1. Noo 2 Economics says:

        “So your scenario could get more cataclysmic if a weakening rate of
        growth sees the pound fall which will feed into imported inflation.”

        And that’s kind of what I expect to happen, excepyt it will be improving US growth which will cause the dollar to rise as money flows there and so the pound will fall bringing with it extra inflationary pressure on top of labor inflation and later, so will UK GDP as these inflationary forces gather strength. Expect this to start happening any time from Summer 2015 – Summer 2016. The BOE need to increase interest rates to circa 2.5 % over the next 3 months to ameliorate the effects of this development – it’s been done before (remember late 1987 – 1990?), but then I woke up! My song nomination for today blog is “Enjoy yourself” by the Specials for the next 15 months because then it will be time to brace ourselves…

  4. Eric says:

    Hi Shaun,
    It all sounds promising, but I wonder if we are sitting on a time bomb of rising asset prices supported primarily by a mountain of debt (yes, it’s the banks, again – still too big to fail).

    I’d certainly be a lot happier if the base rate was not still on the floor and economic growth was being supported more by rising exports, incomes and investment. The fact that the base rate can be held at 0.5% for 5 years and not cause inflationary havoc is very worrying.

    Or have things changed so much that my 1960s education is worthless!

    1. dutch says:

      ‘It all sounds promising, but I wonder if we are sitting on a time bomb
      of rising asset prices supported primarily by a mountain of debt’

      and falling real wages.

    2. Noo 2 Economics says:

      It’s all about velocity of money and it’s very very sluggish at the moment, but with the monetary base the BOE, BOJ and Fed have built if things start picking up properly then they’re going to have to move very very fast to sterilise all their asset purchases to stem inflation, otherwise we’ll have a massive inflationary event. Unfortunately, Central Banks take a long time to recognise changes and an age to react to them…….

  5. AnneD says:

    If I am correct in my understanding of the current situation, the downward spiral of deflation will accelerate. Expenditure of capital to expand businesses will decelerate. Automation of labour intensive activities will accelerate displacing lower skilled workers. Opportunities for workers with advanced skills will increase; however, our educational system cannot keep up pace with that demand. Rising currency value will decrease exports (deflation) creating more pressure on employment and wages. Government will keep increasing the money supply in the hope of reversing the economic trend. That hope will not materialize. A Sovereign Debt Crisis will be the end of the road. “Osborne’s austerity message is set to be dented by the government’s own statistics body, as it prepares to adopt new calculations that mean the UK’s public sector debt will be £100 billion greater than estimated. The Office for National Statistics will bring in the new calculation this autumn.”

  6. therrawbuzzin says:

    So we won’t need the “boost” to the economy of HS2?
    HS2 is an interesting project, primarily because of the inherent contradictions between its planning, and its aim.
    “Boosting the economy,” would be best achieved by starting the project where the economy is struggling most, namely by starting with phase 2, and building from north to south, yet the opposite is happening.
    This gives the clue to HS2’s real purpose: start in the north, and HS2 doesn’t serve London until its completion.
    HS2 is being built to serve the parasite-that-is-London’s growing voracity.
    The workers it will need, will have no prospect of being able to afford to live there, and HS2 will widen the realistic commuter range.
    Why separate it into two phases?
    Simple, Manchester and Leeds will still not be realistic distances for large numbers of London commuters, and there has never been any intention of building it. It’s a temporary sop to those whose taxes will help fund it.
    Why not distribute the investment over the network as a whole, as has been suggested?
    London will only be able to drain the rest of the UK of even more talent than it does now with the help of HS2.

    1. dutch says:

      ‘HS2 is being built to serve the parasite-that-is-London’s growing voracity.’

      ‘Why not distribute the investment over the network as a whole, as has been suggested?’

      There’s a lot of common sense in that post RWB.

      1. therrawbuzzin says:

        One further point has since re-arisen in my far-from-perfect memory: when the costs of the HS2 were being calculated, no value was put on the executive work which WOULDN’T get done on the train because of the shorter journey time.
        Accident or design?
        If HS2 was being built for equitable travel between London and Birmingham then it would be a huge cost, however, if, on the other hand, HS2’s primary purpose is to shuttle back and forward London’s wage slaves, then it is of little consequence, and would probably not enter the consciousness of planners.
        Lies tend to be found out in omissions.

        1. Noo 2 Economics says:

          I don’t understand why many many more managers don’t work from home. You can have online meetings via webcams and web microphones. This blog is effectively a meeting place, if anything we need to live more local lives communicating via telephone/internet and cut the business journeys down.

          Of course this doesn’t apply to manual workers or telephone answering staff etc but if these technologies were efficiently ultilised it could make a significant contribution to reducing rail, road and air traffic thereby negating the need for any more new rail track or roads to be built.

  7. Max says:

    Yes. London is full of cranes. I have never seen so many. it is incredible. And most of the workers are Eastern European.
    The housing market is ‘recovering’ to astronomically unaffordable levels.
    Interest rates are 0.5% and will never go up ever again.

    What could possibly go wrong? I can’t imagine.

    Followed by politicians murmuring about “we need to learn lessons…blah blah blah”

  8. Max says:

    The whole point of the BoE is to calm down this bubble and stop wild lending. Instead the banks will have massive exposure to housing debt and will be even more too big to fail.

    Nothing has been learnt from the past. We are governed by selfish morons.

  9. Anonymous says:

    Hi Dutch

    There are two ways of analysing the services balance of payments figures. One is simply to look how often they arrive at the same number or to note that they get one page on the monthly report as to the 23 devoted to trade detail.

    The other is too note that the information is based on a quarterly service so technically there are no monthly numbers.

    As to the new car sales the SMMT released this with the strong March numbers.

    ““There has never been a better time to buy a new car thanks to attractive finance deals and advanced technologies that often make new cars cheaper to run. We expect the market to continue to perform positively for the rest of the year, albeit at a more modest rate.”

  10. Anonymous says:

    The new common rail diesel cars are cheaper on fuel, and faster. There is a catch, in that the motor industry is charging very high prices for injectors, EGRs and diesel pumps. Ergo once these cars go out of warranty, there is a chance of a £500+ repair bill which would wipe out most people’s fuel savings.

    But for the car industry. it’s great – repair it we win. Scrap it and replace it we win.

  11. dutch says:

    Thanks for the insights as ever Expat and Shaun.I learn a great deal on here.

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