House purchase lending growth remains steady in second quarter
New CML data on the characteristics of lending in June show that it remains driven primarily by lending for house purchase, rather than remortgage.
Total gross lending in June grew by 6% on the month to £17.9 billion (20% up on June last year), according to the Bank of England. In the quarter, gross lending totalled £51.4 billion - up 11% on the first quarter, and 23% on the second quarter of 2014.
Monthly highlights:
There were 28,600 first-time buyer loans in June - 7% more than in May, and 19% up on June 2013. By value, there was £4.2 billion of lending to first-time buyers in June - 11% up on May and 27% higher than June last year.
Lending to home movers also grew, but by less. In June, the number of loans to movers was 31,900, 4% up on the previous month and 11% on June last year. By value, lending to movers was £5.9 billion, 5% up on May and 23% up on June last year.
Remortgage lending remains muted compared with both first-time buyer and home-mover lending. The number of remortgages in June was 1% up on May but 8% down on June last year, although the value (£3.7 billion) was up 6% on both.
Buy-to-let lending grew 5% over the month to £2.2 billion in June, though the number of loans was the same as May at 15,600. But growth was strong compared with June last year - 38% up by value and 23% by number.
Quarterly highlights:
In the second quarter as a whole, there were 79,900 first-time buyer loans - 17% up on the previous quarter, and 24% up on Q2 2013. In the second quarter as a whole, first-time buyers borrowed £11.5 billion - up 12% on the previous quarter and 34% on Q2 2013.
At 91,000 loans, there were 16% more home-mover loans in the second quarter than the first, and 15% more than in Q2 2014. On a quarterly basis, the value of home-mover lending was £11.3 billion, up 19% on the first quarter and 27% up on the second quarter 2013.
In the quarter, there were fewer remortgages than in either the previous quarter or Q2 2014. By value, remortgaging was 2% down on the first quarter but 5% up on Q2 2013.
The value of buy-to-let lending was 3% up on the first quarter and 31% up on Q2 2013. The number of buy-to-let loans was 1% higher than the first quarter, and 22% up on Q2 2014.
Lending for home-owner house purchase
House purchase lending to home-buyers increased month-on-month in June totalling 60,500 loans, up 5% compared to May and the value of these loans totalled £10bn, a rise of 6% on May. Compared to June 2013, the number of loans increased by 15% and the value of lending by 23%.
In the second quarter of 2014, home-owner house purchase lending saw quarter-on-quarter and year-on-year growth. Number of loans advanced in this period totalled 171,000, an increase of 17% on the first quarter of 2014 and up 19% on the second quarter of 2013. These loans totalled in value £28.2bn, up 19% on the first quarter and up 29% on the second quarter of 2013.
Lending to first-time buyers
First-time buyer affordability changed fractionally, with first-time buyers typically borrowing 3.47 times their gross income, compared to 3.46 in May. The typical loan size for first-time buyers was £123,865 in June, up from £121,500 in May. The typical gross income of a first-time buyer household was £37,000 in June compared to £36,500 in May.
While new regulatory rules came into effect in the second quarter of 2014, first-time buyer characteristics changed only marginally within this period. First-time buyers borrowed on average £122,000, up from 118,750 in the first quarter of the year. They typically borrowed 3.46 times their income, up slightly from 3.43 in the first quarter of 2014. The average household income of first-time buyers increased to £36,700 in the period, up from £35,700 in the first quarter of 2013.
The relatively low level of interest rates saw first-time buyers' payment burden remaining relatively low in June at 19.3% of gross income being spent to cover capital and interest payments, down slightly from 19.5% in May.
Lending to home movers
In the second quarter of 2014, lending to home movers showed similar, albeit slightly lower, growth patterns to first-time buyer lending.
Home mover affordability changed fractionally, with home movers typically borrowing 3.09 times their gross income, compared to 3.10 in May. The typical loan size for home movers was £154,000 in June, up from £150,000 in May. The typical gross household income of a home mover was £52,000 in June compared to £50,600 in May.
Home movers' payment burden remained relatively low in June at 18.7% of gross income being spent to cover monthly capital and interest payments, up slightly from 18.7% in May.
While new regulatory rules came into effect in the second quarter of 2014, home movers characteristics changed only marginally within this period. Home movers borrowed on average £151,000, up from £147,000 in the first quarter of the year. They typically borrowed 3.09 times their income, up slightly from 3.05 in the first quarter of 2014. The average household income of home movers increased to £51,300 in the period, up from £50,200 in the first quarter of 2013.
Lending to home owners for remortgage
Remortgage lending has not seen the same growth trajectory as house purchase lending to home-owners. However, while volumes have been modest, value has risen.
Home-owner remortgage lending in June totalled 23,600 loans advanced in the period, which was a slight increase of 1% on May but a decrease by 8% on June 2013. These loans totalled £3.7bn in value, an increase of 6% month-on-month and also 6% up compared to June 2013.
In the second quarter of 2014, remortgage lending saw a decrease in the number of loans totalling 74,600, down 5% on the previous quarter and a year-on-year decline of 8% compared to the second quarter of 2013. By value, the loans totalled £11.3bn this period, down 2% on the previous quarter, but up 5% in comparison to the second quarter of 2013.
Lending for buy-to-let
There were 15,600 buy-to-let loans in June, representing lending of £2.2bn. The number of loans was the same as in May but the total value increased from £2.1bn. Compared to June 2013, this was a 23% increase by volume and 38% by value exceeding the rate of growth in home-owner house purchase lending.
Overall buy-to-let lending in the second quarter of 2014 increased slightly on the previous quarter but more substantially in comparison to the same period last year. Gross buy-to-let lending totalled 46,200 loans, an increase of 1% quarter-on-quarter but up 22% on the second quarter of 2013. The loans totalled £6.3bn, up 3% on the first quarter of 2014 and up 31% on the second quarter of 2013.
Within the overall total of buy-to-let loans, 8,200 were advanced in June for house purchase and 7,250 for remortgage. The number of buy-to-let house purchase loans was down slightly by 1% compared to May but up 24% compared to June last year. This totalled £1bn in value, unchanged from May but up 37% on June last year.
The number of remortgage loans increased slightly compared to May, up 1% but more substantially by 23% compared to June last year. These loans had a total value of £1.1bn, up 3% on May and 31% on June last year.
In the second quarter of 2014, there were 24,000 loans for buy-to-let house purchase, up 5% on the previous period and up 24% on the second quarter 2013. These loans totalled £2.9bn, up 8% quarter-on-quarter and up 37% on the second quarter last year.
Similar to the monthly trends, buy-to-let remortgage lending totalled 21,700 loans with a total value of £3.2bn, down slightly by 2% by volume and unchanged in value on the previous quarter. In comparison to the second quarter last year, total number of loans increased by 20% and the value of these loans increase this period by 29%.
Paul Smee, director general of the CML, commented: “For the second month running since new FCA rules took effect, lending characteristics remain similar to the market beforehand. We now feel confident that, as we would hope, the MMR effect is more gentle dampener than hard brake. As we recently suggested in our revised forecasts, lending levels should continue to increase modestly over the course of the year, driven mostly by house purchase but with remortgaging also recovering.”