14th July 2015
The number of mortgages for home purchases dropped by 15.8% in May compared to a year ago, although the figure was up marginally by 1.4% compared to April’s figure.
There were 49,000 loans for house purchase in May, worth a total of £8.4bn. By value, May’s total was 12.5% lower than a year ago, but 2.4% higher than in April, according to figures from the Council of Mortgage Lenders.
The number of loans for remortgaging was down 10% compared to a year earlier, while the value of those loans was also dropped by the same percentage at 27,000 and £3.7bn respectively.
he typical income multiple peaked in May 2014 with the average mortgage loan equating to 3.28 times gross income. It has since trended downwards and currently stands at 3.17.
Overall, the value of home-owner loans for house purchase accounted for 53% of gross lending, while remortgage activity accounted for 23%. Home-owner loans as a share of gross lending has increased since the new year while remortgage activity has edged down.
The number of loans to first-time buyers in May was down 16% compared to a year earlier at 27,000, but was 1% higher than April’s figure.
The total advanced to first-time buyers was 13% lower than a year ago, but 3% higher than in April at £3.4bn
Competitive mortgage rates mean first-time buyers are paying a record low proportion of their monthly income to service the capital and interest rate payments of their mortgage. This is the lowest level since the CML began tracking this in 2005.
The number of buy-to-let loans was up 12% by number and 19% by value compared to a year earlier at 17,500 and £2.5bn respectively.
Paul Smee, director general of the CML, says: “House purchase lending in May was slightly up on the previous month, suggesting the market might be waking up after a subdued first quarter.
“Activity has broadly been down on last year but we expect it to rise in the summer months as, with historically low interest rates and a competitive lending environment, borrowing conditions are relatively favourable.
“But we cannot ignore the continuing affordability constraints caused by high house prices relative to earnings which will work in a contrary direction.“
Ben Thompson, managing director of estateagent4me.co.uk, adds: “Lending has fallen to remortgagers over the last month, but increased among first time buyers and home movers, as mixed conditions in the market continue. Overall, lending so far this year has not reached the highs many anticipated, although the buy-to-let market has seen the strongest growth. Following the Chancellor’s Budget speech last week and the changes to buy-to-let tax relief, it will be interesting to see how these trends develop in the coming months.
“If we are to see growth in all parts of the market, it will need to be backed up by increased housing supply. With demand strong across the market, from first to last time buyers, we are seeing competition rise, and house prices with it. For lending to grow, we need a concentrated programme of house building. As it stands, we are in real danger of seeing buyers fall through the ever increasing gap between housing supply and demand.”