Monday, June 18, 2012
Following the surge in activity in March, April saw a
significant fall in house purchase lending, in particular to
first-time buyers, according to new data from the Council of
Mortgage Lenders. This was in line with expectations and was caused
by the distorting effect of the March ending of the stamp duty
concession.
The largest fall was to first-time buyers, with lending at
around half the levels of the previous month.
The drop off in activity for first-time buyers was seen mainly
among properties that would have qualified for the exemption in
March, so were subject to stamp duty in April. Purchases of
properties valued between £125,000 and £250,000 fell by 70% in
April compared to March. In contrast, those valued at £125,000 or
below, so still exempt from stamp duty, fell by a more modest 11%,
while first-time buyer purchases for properties over £250,000, so
not eligible for the exemption in any case, fell by only
5%.
Table 1: 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 incomespent on
capital and
interest payments
|
| April 2012 |
12,600 |
1,500 |
80% |
3.12 |
12.5% |
19.1% |
| Change from March 12 |
-48% |
-52% |
80% |
3.34 |
13.1% |
19.8% |
| Change from April 11 |
-12% |
-12% |
80% |
3.16 |
13.3% |
19.8% |
In total, 12,600 loans were advanced to first-time buyers, down by
48% compared with March and 12% compared with April 2011. By value,
first-time buyers borrowed £1.5 billion, down 52% compared with
March and 12% compared with April last year.
The change in the mix of properties bought had knock-on effects
on first-time buyer loan characteristics. The average loan amount
fell from £117,000 in March to £98,000 in April and first-time
buyers typically borrowed 3.12 times their income, down from 3.34
in March. These changes are almost wholly because of the trend in
April towards cheaper properties rather than a real improvement in
affordability for first-time buyers.
Table 2: 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
|
| April 2012 |
23,400 |
3,800 |
70% |
2.87 |
10.0% |
19.1% |
| Change from March 12 |
-15% |
-14% |
70% |
2.92 |
9.9% |
19.2% |
|
Change from April 11
|
3%
|
3% |
69% |
2.84 |
10.0% |
19.0% |
Lending to home movers also fell. 23,400 loans worth £3.8
billion were taken out in April, down by 15% (14% by value)
compared with March, but an increase of 3% (by volume and value)
compared with April 2011.
Total house purchase lending in April fell from 51,600 loans,
worth £7.4 billion, in March to 36,000, worth £5.3 billion, in
April. Remortgaging also saw a fall, with £3.1 billion advanced,
down 14% compared with March and the lowest monthly total since
December 2010.
Table 3: 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 |
| April 2012 |
36,000 |
5,300 |
25,100 |
3,100 |
| Change from March 12 |
-30% |
-28% |
-12% |
-14 |
| Change from April 11 |
-3% |
-2% |
-4% |
-3% |
Nearly all first-time buyers currently take out repayment
mortgages: 98% in April, unchanged from March. The proportion of
home movers and those remortgaging also continues to increase, with
around 85% of home movers and 82% of remortgagors taking out full
capital repayment mortgages. Reflecting the fact that repayment
mortgages are now taken out by the vast majority, CML monthly data
will now show the total proportion of income spent on capital and
interest payments by those choosing this method, as well as the
longstanding affordability measure of the proportion of income
spent on interest alone. In April, first-time buyers spent 19.1% of
their income on both payments (compared with 12.5% on interest
alone), down from 19.8% in March (13.1% on interest alone).
Paul Smee, Director General of CML, commented: "April's
figures show the expected effect of the end of the stamp duty
concession on UK mortgage lending. Given the economic uncertainty,
any significant pick up in lending in the coming months seems
unlikely.
"However, our recent research highlights that over 80% of
people still aspire eventually to own their own homes, and
long term demand clearly still exists."