CML Announce 45% Increase in Mortgage Lending

Lending for house purchases has increased by 45% year on year in March, making it the ninth consecutive month of year-on-year growth, according to figures which were released by the Council of Mortgage Lenders yesterday.

However, remortgaging saw a drop of 29% for year on year which was the 23rd consecutive annual fall, a clear indication of the growing trend in a recovering house purchasing market, and a falling remortgaging market.

According to the CML there were 45,000 loans taken out in March for the purpose of purchasing a house which was a rise of 25% in volume from February, with a further 28,000 loans taken out for remortgaging, up 23% in volume. With values of £6.3billion and £3.5billion respectively (increases of 24% and 21% in value on February) it is certainly worth shouting about and shows the value of the housing market.

Looking at the first quarter as a whole, there were 112,000 loans for house purchase (worth £16.1 billion), down from 171,000 (worth £23.3 billion) in the last quarter of 2009 and 74,000 remortgage loans (worth £9.3 billion) down from 89,000 (worth £11.1 billion) in the last three months of 2009. No trend can be inferred from this though, given the distortion caused by the end of the stamp duty holiday in December.

There has also been a greater rise of first time buyers compared to those moving to another home with 17,300 loans to first-time buyers (worth £2 billion) in March which was a rise of 27% on February and 42% on March 2009, compared to 27,500 home-mover loans (worth £4.3 billion) which was a rise of 24% on February and 49% on March of 2009.

For the second month running, March also saw first-time buyers borrow an average of 76% of the property price. This is the first time average deposits for first-time buyers have been lower than 25% for more than one month since January 2009. Only time will tell if this genuinely reflects a tentative sign of easing, but for the time being deposit constraints remain tight in all areas of lending.

For those with the deposits needed, low rates have made home loans initially very affordable. Home movers in March needed less than 10% of gross income to cover their mortgage interest payments. This is unchanged from February and is the lowest amount since the CML started recording this data in 1974.

First-time buyers have not seen quite as much benefit reflecting the fact that the best priced deals are available only to those with larger deposits. But even so, in the first three months of 2010, they needed just 13.3% of their income to cover their interest payments, the lowest since 2004.

In terms of product choice, only 46% of new loans were fixed-rate deals in March. This has remained broadly unchanged for the first three months of 2010, but is down from 60% in the last quarter of 2009 and a peak of 80% last July. Tracker rates accounted for 37% of new mortgage lending, again broadly unchanged, but up from last July’s low of 12%.

Michael Coogan, Director General of the CML said, “Today’s figures indicate there is currently some momentum to house purchase lending, but for the sake of the future health of the housing and mortgage markets, the new government will need to focus on the critical issue of funding and how to address the issues arising from the repayment of the emergency support provided during the financial crisis.

“The UK is at risk of a chronic under-supply of credit – and the rationing of mortgages for customers – for years to come.”