Housing market activity sees ‘substantial’ increase in May
House purchase lending increased by 36% in May, compared to April – and 29% compared to the same time last month. The number of loans also increased, by 33% from April and 24% from a year ago. Remortgage lending also increased in May with £3.5bn advanced for remortgage.
Paul Smee, director general of CML, said: “It is positive news for the market that the slump following the end of the stamp duty concession seems to have been short-lived. Lending is similar to late 2011 levels and showing a healthy improvement on the same time last year.
According to CML, first-time buyer activity bounced back following the volatility of March and April. 18,100 loans, worth £2.3bn, were advanced to first-time buyers in May, up from 12,700, worth £1.5bn, in April.
But CML highlight that this may be a 43% rise (53% by value) from April but, following the distorting effects of the end of the stamp duty concession, this returns first-time buyer lending back to a similar level seen in the second half of 2011.
The characteristics of first-time buyer loans also began to return to normal after March and April’s stamp duty effect.
First-time buyers on average took out a loan of £104,000 in May, up from £97,750 in April.
They also borrowed 3.21 times their income, up from 3.12 in April and they paid 19.6% of their income in capital and interest payments, up from 19.1%. All of these May figures are more in line with the typical experience over the last year.
The proportion of first-time buyers buying properties valued at between £125,000 and £250,000 rose from 37% in April to 44% in May, but was not quite back at the norm of around 50% seen since 2007.
Lending to home movers also increased with 30,200 loans taken out, worth £4.9 billion.
This was up 29% by number and value compared to April and up 25% (29% by value) from May 2011.
The report also showed that repayment loans continued to dominate within all groups. 98% of loans taken out by first-time buyers were on a capital repayment basis, unchanged since March, 87% of home movers took this option, up from 85% in April and 82% of those remortgaging also did, unchanged since April.
Smee added: “However, the problems in the Eurozone have not gone away. Economic uncertainty could affect both the supply of mortgage lending and consumer confidence and we still anticipate a challenging lending environment for the rest of the year.”