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August house purchase lending down 9% on July but up 2% on last year


12 October 2015 | Author: Gareth Hill
Lending in August:
First-time buyers, home movers, home-owner remortgage and buy-to-let all saw a monthly decline in lending in August but an uptick (significant for buy-to-let) compared to August 2014.
This is a normal seasonal trend, with August typically less strong for mortgage completions.
The underlying picture is of improvement in lending levels on a year-by-year basis.

Bob Pannell, chief economist of the CML, commented:

Seasonal factors pushed all categories of lending lower in August compared to July. However, the mortgage market continues to see year-on-year growth, and we expect this to continue over the coming months.

Chart 1: Loans to home-owners and for buy-to-let by value

 August 2015 MLT press release - chart one


Source: CML Regulated Mortgage Survey (April 2005 onwards), CML Economics

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Chart 2: Number of loans for house purchase and proportion of FTBs and home-movers

August 2015 MLT lending - Chart 2


Source: CML Regulated Mortgage Survey (April 2005 onwards)

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Lending for house purchase and remortgage
Table 1: August lending for home-owner house purchase and remortgage
 No. of house purchase loans% change by volumeValue of house purchase loans, £m% change by valueNo. of remortgage loans % change by volumeValue of remortgage loans, £m% change by value
Aug-1562,300 11,300 25,600 4,200 
Jul-1568,700-9.3%12,300-8.1%30,900-17.2%5,100-17.6%
Aug-1561,400+1.5%10,600+6.6%23,000+11.3%3,500+20.0%


Source: CML Regulated Mortgage Survey (April 2005 onwards)

House purchase lending in the UK saw a month-on-month decline by volume and by value for the first time since April this year. However, this was the third consecutive month that lending for house purchase increased year-on-year by volume and by value. This was the highest house purchase lending activity level for the month of August since August 2007. However, volume levels this month were still only 60% of what they were in August 2007.

As previously reported, UK gross lending in August totalled £19.7bn, down 9% on July but up 10.7% on August last year.

Overall in August, home-owner loans for house purchase accounted for 57% of gross lending (57% in July), while remortgage activity accounted for 21% (24% in July). Home-owner loans as a share of gross lending have increased since the new year while remortgage activity has edged down. Buy-to-let lending as a proportion of total gross lending remained at 17%, a consistent level since the beginning of the year, but up from 13% in the same period last year.

First-time buyers accounted for 44% of total house purchase lending volumes, a much higher proportion than pre-crisis levels of 30% of the number of loans for house purchase.
Table 2: August first-time buyer lending and affordability measures
 
No. of loans
% change by volume
Value of loans £m
% change by value
Loan size (£)
Income (£)
Loan-to-value
Loan-to-income
Interest payment as % of income
Capital & interest payment as % of income
Aug-15
27,500
 
4,200
 
128,999
39,508
84.2%
3.45
10.0%
18.5%
Jul-15
30,700
-10.4%
4,700
-10.6%
127,800
39,305
84.4%
3.42
10.1%
18.5%
Aug-14
27,000
+1.9%
4,000
+5.0%
125,250
38,205
83.7%
3.42
12.0%
19.7%
Source: CML Regulated Mortgage Survey (April 2005 onwards)


This was the highest monthly first-time buyer lending level by volume and by value in the month of August since 2007, but the number of loans was only 78% of the August 2007 total. The proportion of first-time buyer gross household monthly income in August to service capital and interest payments stayed the same month-on-month at 18.5%, but remained considerably lower than 19.7% in August last year, and much lower than the most recent high of 24.8% in December 2007.
Table 3: August home mover lending and affordability measures
 
No. of loans
% change by volume
Value of loans £m
% change by value
Loan size (£)
Income (£)
Loan-to-value
Loan-to-income
Interest payment as % of income
Capital & interest payment as % of income
Aug-15
34,800
 7,100 
168,750
55,891
71.9%
3.14
7.5%
18.1%
Jul-15
38,000
-8.4%
 7,600
-6.6%
166,000
55,215
72.5%
3.12
7.5%
18.0%
Aug-14
34,400
+1.2%
6,600
+7.6%
155,995
54,158
70.3%
3.05
9.0%
18.8%


Source: CML Regulated Mortgage Survey (April 2005 onwards)

This was the highest home mover lending level by volume and by value in the month of August since 2007, although this month's volume levels are still only 51% of the volume levels in August 2007. Home movers spent 18.1% of their monthly gross household income to pay capital and interest repayments, up slightly on last month but down on the same period last year. Like first-time buyers, this is still much lower than the most recent peak of 23.8% in December 2007.

Chart 3: Number of home-owner remortgages
 August 2015 MLT lending - Chart 3


Source: CML Regulated Mortgage Survey (April 2005 onwards)

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Remortgage activity dropped month-on-month in August 17% by volume and 18% by value compared to July. However, in parallel to house purchase activity, there was a year-on-year increase compared to August 2014 by volume and by value, up 11% and 20% respectively.
Lending for buy-to-let

Buy-to-let lending for house purchase has showed stronger year-on-year growth than home-owner loans for house purchase for most of the year, which in part is a market recovery response as buy-to-let lending declined more than home-owner lending during the downturn. While loans to home-owners for house purchase declined by 50% in volume terms from 2007 to 2009, buy-to-let loans for house purchase declined 71% in the same period. Buy-to-let continues to represent 17% of gross lending in August, a proportion that has remained relatively consistent since the beginning of the year.

Overall, buy-to-let lending decreased in August compared to July, but saw substantial year-on-year increases by volume and value compared to August 2014.


Table 4: August buy-to-let lending

Gross lending buy-to-let
Buy-to-let house purchase
Buy-to-let remortgage

No. of loans
 % change
Value   of loans (£m)
% change
No. of loans
% change
Value   of loans (£m)
% change
No. of loans
% change
Value   of loans (£m)
%
change
08-15
22,200
 3,400

10,500
 
1,400
 
11,500
 
1,900
 
07-15
25,200
-11.9% 3,800
-10.5%
11,800
-11.0%
1,600
-12.5%
13,200
-12.9%
2,200
-13.6% 
08-14
16,100
+37.9%2,300 
+47.8%
8,300
+26.5%
1,000
+40.0%
7,600
+51.3%
1,100
+72.7%

Source: CML Economics


Chart 4: Number of buy-to-let loans for house purchase and remortgage
 August 2015 MLT Lending - Chart 4



Source: CML Economics

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Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.3 trillion.

2. Source: CML Regulated Mortgage Survey for all home-owner mortgage data. Buy-to-let data is sourced from a sample of CML members and has been grossed to estimate the industry total. The CML began collecting monthly data in January 2013 and will from now on report monthly buy-to-let data in this press releases, alongside our home owner house purchase data.

3. The Council of Mortgage Lenders does not publish statistics for mortgage approvals. The data in our monthly Regulated Mortgage Survey and gross lending press releases relate to mortgage advances only. A mortgage approval is the firm offer to a customer of a specific amount of credit secured against a particular property. A mortgage advance is the total amount of loan actually provided to the buyer, by the lender. Please see the mortgage statistics timeline on our website for further information.

Further Reading
UK house prices increased by 5.2% in the year to August 2015, unchanged from 5.2% in the year to July 2015

Mortgage Lenders and Administrators statistics Bank of England Sept 2015