23% more first-time buyers in January 2012 than January 2011

By Bridging Loan Directory -

 

Both house purchase and remortgage lending fell in January, according to new data released today from the Council of Mortgage Lenders.

35,600 loans (worth £5.3 billion) were taken out for house purchase in January. This is a rise of 22% by volume and 23% by value from a year ago but a fall of 25% by volume and 24% by value on December 2011. This reflects the normal seasonal pattern where cold weather, lack of daylight and post-Christmas cash flow problems in January are likely to deter buyers from moving house.

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 2012 35,600 5,300 26,600 3,500
Change from December 2011 -25% -24% -6% -3%
Change from January 2011 22% 23% -13% -5%

January saw a drop in both the number and value of loans taken out for remortgage. 26,600 loans (worth £3.6 billion) were taken out, down from 28,200 (worth £3.5 billion) in December. Remortgage lending experienced its first year-on-year fall since the end of 2010, with the number of loans down 13% and the value down 5% from January 2011.

 

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
January 2012 13,200 1,600 80% 3.20 12.2%
Change from December 2011 -30% -30% 80% 3.30 12.3%
Change from January 2011 23% 23% 79% 3.16 12.6%

The number of both first-time buyers and home movers in January increased from the year before but fell from December. The number and value of first-time buyer mortgages fell 30% from December but rose by 23% from January 2011.

Home mover numbers fell from 28,900 (worth £4.7 billion) in December to 22,400 (worth £3.6 billion) in January. Like first-time buyers, there was a significant increase in numbers from the previous January, when 18,600 home movers took out loans worth £3.1 billion.

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
January 2012 22,400 3,600 70% 2.92 9.6%
Change from December 2011 -22% -23% 70% 2.95 9.5%
Change from January 2011 20% 16% 67% 2.87 9.7%

For the last year, first-time buyers have borrowed on average 80% of their property and that was unchanged for January. The typical home mover borrowed 70% for the fourth month running.

First-time buyers continue to pay less of their income on mortgage interest, 12.2%, down from 12.3% in December. But as our recent article, To buy or not to buy, explained, in addition to interest payments, deposit and capital repayments form a large part of the payment burden for potential first-time buyers.

Director general of the CML Paul Smee said:

“We traditionally see a substantial fall in lending figures at the start of the year, reflecting the lack of enthusiasm by buyers to move house during the post-Christmas months, and this January has been no exception. But the year-on-year rise in house purchase lending suggests that lending levels are generally rising although we expect the trajectory to be bumpy rather than smooth this year.

“Average deposits for first-time buyers have stayed steady at around 20% for over a year but that figure may start to drift down gently over the coming months especially as NewBuy has been launched for new homes.”