UK mortgage lending in February continues strong year-on-year growth

By Bridging Loan Directory -

 

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

 

 

  • The dip in mortgage lending in February was primarily due to the expected seasonal factors associated with this time of year but year-on-year growth comparisons remain strong.
  • Total number of loans advanced to home-owners for house purchase remained practically unchanged in February compared to January but increased 33% compared to February 2013.
  • First-time buyers took out 22,200 loans in total in February, a modest rise in volume compared to January but up 41% compared to February 2013.
  • Home movers took out a total of 26,200 loans for house purchase in February, down 2.2% compared to January but up 27% compared to February last year.
  • The total number of loans taken out by home-owners for remortgage fell in February by 15% compared to January but still had a strong year-on-year increase up by 17% compared to February 2013.
  • Gross buy-to-let loans advanced decreased in February to 14,300 compared to 15,700 in January but there was a strong year-on-year increase in volume of 46% compared to February 2013.

The Bank of England reported earlier this month gross UK mortgage lending was £14.8 billion in February, a 8% fall compared to January, but 40% higher in value than February last year.

Lending for home-owner house purchase

Despite the predicted seasonal dip around this time of year, lending for home-owner house purchase in February remained steady. The total number of loans advanced to home-owners for house purchase was 48,400 loans, only a slight difference to the 48,500 loans in January, but an increase in volume of 33% compared to February last year. Overall, the value of the loans advanced in February totalled £7.8bn, which was only slightly lower than £7.9bn in January but a substantial increase of 47% compared to February 2013.

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

15.04.2014 home owner house purchase 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
February
2014
48,400 7,800 23,800 3,500
Change from
January 2014
0.0% -1.3% -15.0% -16.7%
Change from
February 2013
32.6% 47.2% 17.2% 29.6%

Lending to first-time buyers

The total number of loans advanced to first-time buyers in February totalled 22,200, a slight increase of 2.3% in volume compared to January and up 41% compared to February 2013. These loans totalled £3.1bn in value which was exactly the same as the January figure but an increase of 55% compared to February 2013.

The typical first-time buyer income multiple increased slightly, with first-time buyers typically borrowing 3.40 times their gross income, compared to 3.39 in January. The typical loan size for first-time buyers was £119,000 in February, which was a decrease from £119,735 in January. In parallel to this, the typical income of a first-time buyer household fell slightly to £35,297, which was down from £36,408 in January.

Low mortgage interest rates have kept borrowers’ payment burden low. First-time buyers spent 19.2% of gross income to cover capital and interest payments, lower than the 19.3% in January and only slightly higher than the recent lowest level of 19.1 recorded in April 2012, April 2013 and November 2013.

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

15.04.2014 first time buyer 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
February
2014
22,200 3,100 82% 3.40 11.2% 19.2%
Change from
January 2014
2.3% 0.0% 82% 3.39 11.3% 19.3%
Change from
February 2013
41.0% 55.0% 80% 3.21 12.6% 19.5%

Lending to home movers

The number of loans advanced to home movers for house purchase totalled 26,200 in February, down 2.2% in volume compared to January but up by 27% compared to February 2013. Home mover loans totalled £4.7bn in value in February, which was a month-on-month decrease of 4% from January but up 38% compared to February 2013.

Chart 3: The number of loans advanced to home movers per month

15.04.2014 home mover 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
February
2014
26,200 4,700 71% 3.04 8.7% 18.5%
Change from
January 2014
-2.2% -4.1% 70% 2.99 8.6% 18.6%
Change from
February 2013
27.2% 38.2% 70% 2.87 9.4% 18.7%

Lending to home owners for remortgage

Home-owner remortgage activity showed the biggest seasonal dip of all the lending types decreasing in February to 23,800 loans, down in volume 15% compared to January but up from February 2013 by 17%. These loans totalled £3.5bn in value, which was down 17% on January but up 30% compared to February 2013.

Chart 4: Number of loans advanced for remortgage per month

15.04.2014 remortgage graph

Source: CML

Lending for buy-to-let

Buy-to-let lending was also affected by seasonal factors in February with gross buy-to-let lending totalling 14,300 loans advanced, which was down 9% compared to January but up 39% compared to February 2013. The value of these loans totalled £1.9bn, which was again a decrease compared to January down 10% but up 46% compared to February 2013.

Similarly, buy-to-let lending for house purchases decreased to 7,500 loans advanced, down 7% compared to January but up 37% compared to February 2013. The loans totalled £900m in February, which was unchanged from January but up 58% compared to the same month last year.

Buy-to-let remortgage lending also decreased month-on-month to 6,600 loans, down 12% in volume compared to January but up 41% compared to February 2013. These buy-to-let remortgages had a total value of £1bn, down 9% compared to the previous month but up 64% compared to February 2013.

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

15.04.2014 buy to let 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 purchaseloans Value of BTL house purchase loans, £m Number of BTL
remortgage loans
Value of BTL remortgage
loans, £m
February
2014
14,300 1,900 7,500 900 6,600 1,000
Change from
January 2014
-8.9% -9.5% -7.4% 0.0% -12.0% -9.1%
Change from February 2013 38.8% 46.2% 36.6% 57.9% 41.0% 63.9%

Paul Smee, director general of the CML, commented:

“We would expect a seasonal lending dip around this time of year. However, lending to both first-time buyers and home movers bucks this trend, continuing to show momentum. The substantial year-on-year growth shows how far the market has moved since the flat period experienced up until around a year ago.”

“The new regulation of mortgages that takes effect at the end of April is a significant change. The industry is ready for the transition, although there is clearly potential for lending to be distorted temporarily over the coming months, given the magnitude of the changes and the importance of complying with regulatory expectations. Overall, we expect to see continuing growth in mortgage borrowing ahead, within responsible lending parameters, as the pent-up demand of the recession years finds an outlet in a stronger market.”

Lucy Hodge, director Vantage Finance commented:

“The continued growth of the buy-to-let market shows that there are still plenty of opportunities out there for property investors. We’ve had a strong pipeline of applications since the beginning of 2014 and February’s figures show just how much the market has developed over the last year.

“The demand for buy-to-let properties is high and it will be interesting to see what the knock-on effect of the MMR later this month will be on this unregulated market. It remains to be seen whether demand will soar and whether lenders will become more stringent in this market too.”