By value, lending to first-time buyers was up 3% on March and 52% higher than in April last year.
The number of loans to home movers increased in April by 11%, with the value up 15% compared to March. Compared with April 2013, growth was up 30% by volume and 47% in value.
Total number of loans for home-owner house purchase (first-time buyers and home movers) increased month-on-month by 6% and 11% by value on March, with year-on-year growth in number of loans up 33% and 47% by value.
Total number of loans for remortgage in April was up 6% and 11% by value compared to March.
Total number of buy-to-let loans declined slightly month-on-month down 1% in April but the value remained unchanged. Compared to April 2013, there was a 43% increase in number of loans and a 57% increase in overall value.
The Bank of England reported earlier this month gross UK mortgage lending was £16.5 billion in April, an 8% increase compared to March and 35% higher than the total of £12.2 billion in April last year.
Lending for home-owner house purchase
Home-owner house purchase lending in April increased month-on-month as lending continued to recover from the usual seasonal dip seen at the beginning of the year. In total, 53,200 loans were advanced for house purchase, up 6% compared to March, and the value of these loans totalled £8.8bn, a rise of 11% on March.
Compared to April 2013, the number of loans increased by 33% and the value of lending by 47%.
Lending to first-time buyers
First-time buyers took out 24,500 loans in April, up only slightly by 1% compared to March but 37% more than in April 2013. The total value of these loans was £3.5bn, which was up 3% on March and 52% on April last year.
First-time buyer affordability worsened fractionally, with first-time buyers typically borrowing 3.42 times their gross income, compared to 3.41 in March. The typical loan size for first-time buyers was £121,500 in April, up from £118,750 in March and represents the highest monthly average advance for first-time buyers on record. In parallel to this, the typical income of a first-time buyer household increased to £37,000, up from £35,704 in March, which was also the highest average income on record.
The relatively low level of interest rates means borrowers' payment burden remains relatively low at 19.4% of gross income being spent to cover capital and interest payments, up from 19.2% in March and 19.1% in April 2013.
Lending to home movers
The number of loans advanced to home movers for house purchase totalled 28,700 in April, up 11% compared to March and 30% compared to April 2013. Home mover loans totalled £5.3bn in value in April, which was up 15% on March and up 47% on April last year.
Lending to home owners for remortgage
Home-owner remortgage activity in April totalled 26,300 remortgage loans advanced in the period. Unlike house purchase loans, the number of remortgage loans did not show an increase, but remained unchanged, in April compared to April 2013. However, it was 6% higher than in March. These loans totalled £4bn in value, an increase of 11% month-on-month and up 18% compared to April 2013.
Lending for buy-to-let
Buy-to-let lending in April totalled £2.2bn, representing 16,200 loans. This was virtually identical to March, but up 43% by volume and 57% by value compared to April last year.
Within the overall total of buy-to-let loans, 8,400 were for house purchase and 7,600 for remortgage. The total number of buy-to-let house purchase loans was up 3% compared to March and up 49% compared to April last year. The loans totalled £1bn in value, up 2% month-on-month and up 61% on April last year.
The number of remortgage loans was 6% lower than in March, but up 38% on April last year. These loans had a total value of £1.2bn, up 3% on March and 60% compared to April last year.
Paul Smee, director general of the CML, commented:
“First-time buyers and home movers continue to be key drivers in the growth of the market and, despite fears that MMR preparations may hinder this momentum, we have seen a continued year-on-year upward trend every month in 2014. The UK picture continues to mask a disparate set of varied local conditions, but overall we expect lending levels to continue to build on the foundation of growth we have seen over the past 12 months."
Simon Crone, Vice President – Mortgage Insurance Europe for Genworth, comments:
“Today’s figures show a visible slowdown in the rate of growth in first time buyer lending in April as new affordability rules went ‘live’ across the mortgage market. A 1% monthly rise in first time buyer loans refutes the idea that activity is racing out of control. Compared with an 11% rise in home mover loans and a 6% rise in remortgage loans, first time buyers are clearly feeling the greatest impact of tightening affordability criteria under the Mortgage Market Review (MMR).
Although average income multiples have risen slightly, the new rules means that loans are only being granted to borrowers whose income and expenditure stand up to stress tests at significantly higher rates. This is especially true for the modest number using the Help to Buy mortgage guarantee scheme, as lenders offering these products have been MMR-compliant from the start.
There is clearly room for some fine-tuning of ‘Help to Buy 2’, as the £600,000 ceiling on purchases is far higher than is needed to support aspiring first time buyers. But today’s figures suggest that any moves to significantly limit the scheme may have dire consequences and add to the difficulties that have blighted this part of the market since the recession.
There is still a gulf between April’s 17% average first time buyer deposit and the 5-10% deposits that were the norm throughout the Eighties, Nineties and early 2000s. It remains a long term issue that demands a long term solution from government in partnership with the private sector.”
David Newnes, director of Your Move and Reeds Rains commented:
“First-time buyers are still flocking to market, taking out 37% more loans than in April last year. Sustained demand at the entry level of the market has filtered through to a widening of choice for borrowers with smaller deposits. Greater volumes of high LTV lending are making homeownership a tangible reality for thousands of households, as steady rents, low inflation and stronger wage growth boost consumer finances and allow people to make their first step onto the property ladder.
However, in May a new calm permeated the market – and we’ve seen evidence of sales and total house purchase lending slowing as we move towards summer. There are early signs that price growth is moderating, for example in London prices have started to fall at the very top end of the market as demand cools. This will give the rest of the country some valuable breathing space to catch up, as Help to Buy throws a lifeline out to the regions and continues to drive activity where the recovery still has a way to go.”
Stuart Law, CEO of Assetz, comments:
“Today’s mortgage data shows the depth of growth for buy-to-let with a 43% year on year increase in the number of loans and a 57% increase in overall value. Investors are increasingly heading for hotspots away from London, and in particular Northern cities where employment is strong, in search of higher yields are greater and long term capital appreciation.
However, contrary to some claims, first-time buyers are not being stymied by investors with the volume of loans to these aspiring homeowners up 37% year on year. A word of warning: new built stock is actually running low at the same time that our investor appetite for off-plan is returning nationwide. Recent renewed efforts to improve the planning process and potential release of brownfield land announced by the government are welcomed but let’s see some quick action and buy-in here from local authorities; rhetoric alone won’t deliver supply.”
Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), comments:
The mortgage market has maintained its recent growth spurt, with all forms of lending – particularly to first-time buyers – seeing a significant bounce since 2013. The introduction of Help to Buy, as well as greater availability of high loan-to-value mortgages, means the number of first-time buyers able to access mortgage finance has more than doubled since April of last year. However, there are clear signs that this is slowing with monthly growth of just 1% in first time buyer numbers.
Demand has not been held back by recent changes in the mortgage market, with MAB’s latest National Mortgage Index showing buyer application volumes were up 5% in May. However, post-MMR the profile of mortgage applications has significantly altered, with average LTVs falling while income and deposits rise. This increased focus on affordability means first-time buyers, who do not have any equity to fall back on, may need some extra support as new lending rules bed in.
It could be some time before we can judge the full impact of MMR. The government and Bank of England should therefore be wary of heaping extra constraints on the market prematurely: stunting the market’s growth at this stage is unnecessary when there are already careful checks and procedures in place.”
