MMR impact on lending appears subtle, rather than dramatic

By Bridging Loan Directory -


New CML data released today on the profile of UK lending in May 2014, including first-time buyer, home mover, remortgagor and buy-to-let lending, shows:

  • The number of loans to first-time buyers rose by 9% in May compared to April, and was 19% higher than in May 2013. By value, lending to first-time buyers was up 11% on April and 30% higher than in May last year.
  • Both the number and value of loans to home movers increased month-on-month in May by 8%. Compared with May 2013, growth was up 9% by volume and 21% in value.
  • Reflecting these trends, overall home-owner house purchase lending in May rose 9% on April by both volume and value, with year-on-year growth in number of loans up 13% and 25% by value.
  • Remortgage lending dipped in May, down 18% in number and value compared to April. Compared to May 2013, remortgage lending declined 26% in volume and 15% by value.
  • The monthly number of buy-to-let loans was up 4% in May with value up by 5%. Compared to April 2013, there was a 14% increase in number of loans and a 22% increase in overall value.

The Bank of England reported earlier this month gross UK mortgage lending was £16.8 billion in May, a 2% increase compared to April and 14% higher than the total in May last year.

Lending for home-owner house purchase

Home-owner house purchase lending in May increased month-on-month totalling 57,900 loans, up 9% compared to April, and the value of these loans totalled £9.6bn, also a rise of 9% on April. Compared to May 2013, the number of loans increased by 13% and the value of lending by 25%.

Chart 1: Number of loans for home-owner house purchase per month

 11.07.2014 house purchase website graph

Source: CML

Table 1: Loans for home-owner house purchase and remortgage

Number of house
purchase loans
Value of house
purchase loans, £m
Number of
remortgage loans
Value of remortgage
loans, £m
May 2014 57,900 9,600 21,600 3,300
Change from
April 2014
8.8% 9.1% -17.9% -17.5%
Change from May 2013 13.1% 24.7% -26.3% -15.4%

Lending to first-time buyers

First-time buyers took out 26,800 loans in May, up 9% compared to April and 19% more than in May 2013. The total value of these loans was £3.9bn, which was up 11% on April and 30% on May last year.

First-time buyer affordability changed fractionally, with first-time buyers typically borrowing 3.43 times their gross income, compared to 3.42 in April. The typical loan size for first-time buyers was £123,200 in May, up from £121,500 in April. The typical gross income of a first-time buyer household remained unchanged at £37,000 compared to April.

The relatively low level of interest rates means borrowers’ payment burden remains relatively low at 19.5% of gross income being spent to cover capital and interest payments, this remained unchanged from April but up from 19.3% in May 2013.

Chart 2: Number of loans advanced to first-time buyers per month

 11.07.2014 first-time buyers website graph

Source: CML

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 Proportion of income spent on capital and interest payments
May 2014 26,800 3,900 84% 3.43 11.7% 19.5%
Change from
April 2014
9.4% 11.4% 83% 3.42 11.6% 19.5%
Change from
May 2014
18.6% 30.0% 82% 3.29 12.1% 19.3%

Lending to home movers

The number of loans advanced to home movers for house purchase totalled 31,100 in May, up 8% compared to April and 9% compared to May 2013. Home mover loans totalled £5.7bn in value in May, which was up 8% on March and up 21% on May last year.

Chart 3: Number of loans advanced to home movers per month

 11.07.2014 home movers website graph

Source: CML

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 Proportion of income spent on capital and interest payments
May 2014 31,100 5,700 73% 3.07 8.9% 18.8%
Change from
April 2014
8.4% 7.5% 72% 3.03 8.8% 18.6%
Change from
May 2013
9.1% 21.3% 70% 2.87 9.0% 18.2%

Lending to home owners for remortgage

Home-owner remortgage activity in May totalled 21,600 remortgage loans advanced in the period. Unlike house purchase loans, the number of remortgage loans declined in May compared to April, down 18% and down 26% on May last year. These loans totalled £3.3bn in value, a decrease of 18% month-on-month and down 15% compared to May 2013.

Chart 4: Number of loans advanced for remortgage per month

 11.07.2014 remortgage lending website graph

Source: CML

Lending for buy-to-let

Buy-to-let lending in May totalled £2.2bn, representing 16,000 loans. This was up 4% in number of loans compared to April and up 5% in value. Compared to May 2013, this was a 14% increase by volume and 22% by value.

Within the overall total of buy-to-let loans, 8,700 were for house purchase and 7,100 for remortgage. The total number of buy-to-let house purchase loans was up 7% compared to April and up 21% compared to May last year. The loans totalled £1.1bn in value, up 10% month-on-month and up 38% on May last year.

The number of remortgage loans declined slightly compared to April, down 1% in total number of loans but up 6% compared to May last year. These loans had a total value of £1.1bn, unchanged on April but up 22% compared to May last year.

Chart 5: Number of buy-to-let loans advanced for house purchase and remortgage per month

 11.07.2014 buy to let website graph

Source: CML

Table 4: Loans for buy-to-let house purchase and remortgage

 Number of Gross BTL advances in period Value of Gross BTL advances, £m   Number of BTL house purchase loans Value of BTL house purchase loans, £m Number of BTL
remortgage loans
Value of BTL remortgage
loans, £m
May 2014 16,000 2,200 8,700 1,100 7,100 1,100
Change from
April 2014
3.9% 4.8% 7.4% 10.0% -1.4% 0.0%
Change from May 2013 14.3% 22.2% 21.2% 37.5% 6.4% 22.2%

Paul Smee, director general of the CML, commented:

“With May lending figures, we get our first glimpse at the effect the Mortgage Market Review has had on lending trends and, at least so far, the impact appears subtle, rather than dramatic. First-time buyers and home movers continue to be key drivers in market growth and their activity does not seem to have been noticeably disrupted. There was no cliff edge; lenders and intermediaries had been methodically working towards applying MMR changes for months leading up to implementation and the figures appear to reflect this.”

Stephen Johnson, Managing Director, Commercial Mortgages, Shawbrook Bank said:

“The buy-to-let sector’s continuing strength demonstrates the key role it plays in the UK’s housing supply. As the residential mortgage market settles into a new regime under the MMR, we may see a boost in rental demand from those who are no longer able to become homeowners driving up the buy-to-let market. If this happens, all parties – investors, brokers and lenders – need to work to ensure that this growth is sustainable. If interest rates rise this year, as the Bank of England has indicated, investors need to be comfortable that income from properties will cover the higher rates that will follow.”