Small fall in lending for September

11 November 2011

Loans for both house purchase and remortgage fell slightly in September, according to new data released today by the Council of Mortgage Lenders.

48,200 loans were taken out for house purchase in September, worth £7.1 billion, down 2% by number and 5% by value compared to August but up 3% by number and value compared to September 2010.

There were 34,200 remortgage loans advanced, worth £4.3 billion. This represented a 1% decline on August (with no change in value) but a 25% increase (26% by value) on a year ago.

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
September 2011	48,200	7,100	34,200	4,300
Change from August 2011	-2%	-5%	-1%	n/c
Change from September 2010	3%	3%	25%	26%

The third quarter overall saw 144,200 loans (worth £21.6 billion) for house purchase, up 16% by volume and 21% by value from the second quarter. However this was 6% lower than the activity levels in the same period last year. In contrast remortgaging from July to September saw both quarterly and annual growth, with the 100,300 remortgage loans (worth £12.6 billion) taken out representing a 23% rise in volume compared to the third quarter of 2010 (24% by value).

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
September 2011	18,200	2,200	80%	3.24	12.7%
Change from August 2011	1%	n/c	80%	3.23	13.0%
Change from September 2010	5%	5%	76%	3.25	13.4%

The decline in house purchase lending in September was driven entirely by a drop in home mover activity. There were 30,100 loans to home movers in September (worth £4.9 billion), down from 31,400 (worth £5.3 billion) from August. BuT in contrast, first-time buyer numbers rose in September. The 18,200 loans (worth £2.2 billion) taken out by first-time buyers represented an increase from 18,000 (no change by value) on August.

Alongside the increase in activity, affordability continued to ease for first-time buyers. In September, interest on a new first-time buyer loan typically consumed 12.7% of the borrower's income, down from 13.0% in August. This reflects the mortgage price easing, particularly in the 80%-90% loan-to-value bracket, that has accompanied greater loan availability at these levels. Home movers on average paid the lowest proportion of their income since monthly records began in 2002 (9.4%) on mortgage interest payments for the second month running.

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
September 2011	30,100	4,900	69%	2.90	9.4%
Change from August 2011	-4%	-8%	69%	2.89	9.4%
Change from September 2010	2%	2%	67%	2.89	9.8%

Since June, nearly all loans to first-time buyers (96%) have been taken out on a repayment basis. However the proportion of home mover and remortgage loans taken out on a repayment basis continues to increase. In September, 82% of home movers and 78% of remortgage loans were on a repayment basis, up from 81% and 76% respectively in August. We expect this trend to continue as yesterday's first-time buyers - virtually all of whom have repayment mortgages - become tomorrow's home movers and remortgagors.

CML director general Paul Smee commented:

"Although both house purchase and remortgage loans experienced a small drop in September the overall market to date shows a stable picture. However, the backdrop of global and domestic instability makes the future more difficult to call.

"A wider public debate is beginning to open up about how to help the housing market act as an engine of growth for our stuttering economy. The CML looks forward to helping to shape and drive this objective."

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