House purchase lending in November experienced a year-on-year rise for only the second time in 2011, according to the Council of Mortgage Lenders.
Loans for house purchase totalled 47,000 (worth £6.9 billion) in November, a 4% rise (5% in value) from October and a 3% rise (5% in value) compared to November 2010. Remortgaging also increased. There were 31,200 loans (worth £4 billion), up from 29,500 (worth £3.7 billion) in October and 30,700 (worth £3.8 billion) the previous November.First-time buyers took out 17,300 loans, worth £2.1 billion in November, up 4% by volume and 5% by value compared to both October 2011 and November 2010. Home mover loans increased by 5% in volume and 4% in value from October and by 2% in volume and value from a year ago. While the number of first-time buyers (and indeed all buyers) has declined markedly since the credit crunch, the proportion of loans advanced to first-time buyers has remained remarkably steady, fluctuating between 34-40% since 2005. In November, first-time buyers took up 37% of the market, the same as in October.First-time buyers continued to see a decline in the proportion of their income accounted for by mortgage interest payments – 12.2% in November compared to 12.3% in October and 13% the previous November. Mortgage interest payments for home movers, however, stayed static at 9.2% for the second month, still the lowest proportion in nine years. Fixed-rate mortgages increased in popularity to their highest point in more than two years in November. 65% of all borrowers took out a fixed rate, up from 62% in October. This may be because a rise in interest rates seems more likely, although not imminent, and borrowers may want to lock in to current favourable rates.Repayment mortgages continue to be chosen by the vast majority of borrowers. 98% of first-time buyers (up from 97%), 83% of movers (up from 82%) and 79% of remortgagers (up from 77%) took out a repayment mortgage in November.CML director general Paul Smee commented:”A rise in mortgage lending towards the end of 2011 is a welcome indicator for the industry considering confidence has been weak due to fragile economies both at home and in the Eurozone. “We should expect a further increase in first-time buyer activity over the next few months as they push through their purchases to take advantage of the stamp duty concession before it ends in March.”Charles Haresnape, MD, Aldermore Mortgages said:“It is encouraging that CML data just issued showed November mortgage lending up 4% from the prior month and up 3% year on year. “But more importantly than that, first time buyers also increased in numbers, again up 4% and remain 37% of the total market. There will be many headwinds during 2012 but at least affordability is very strong and now it is all about consumer confidence.”Mark Harris, chief executive of the mortgage broker SPF Private Clients, commented: ”Growth, even modest growth, is very welcome. At times in 2011, the mortgage market threatened to fizzle out. Now there’s hope that it might just end the year burning a little more brightly. ”We’ve seen a gentle increase in borrower demand, and a greater desire from lenders to make loans available. But the ever increasing popularity of fixed-rate mortgages speaks volumes. ”They are now at their most popular for more than two years – despite an army of economists predicting that the base rate will remain at its current rock-bottom level for many years to come. ”With interest rates going nowhere, discounted or tracker mortgages offer great value right now – and are likely to for some time. But people’s concerns about the economy, and the slowly imploding eurozone, mean that many are choosing the security of a fixed-rate loan. ”In this climate, fear trumps reason every time.”Paul Hunt, managing director of Phoebus Software said: “No matter how much doom-laden analysis one does, the proof ultimately lies in the pudding. A gloomy picture may be emerging from the eurozone, but anyone who predicted this will cause lenders to clam up has been proven wrong by the remarkable resilience shown by the CML’s figures. “The Bank’s commitment to ultra-low interest rates has certainly helped, but the key to boosting both the volume and value of mortgage lending has been lenders’ willingness to take advantage of the favourable conditions to pass on highly affordable finance to borrowers. “That’s not to say rising LIBOR rates, along with a seemingly worsening situation on the continent won’t force lenders’ hands as the year goes on, but it’s hugely encouraging that lenders have shown themselves willing to support borrowers wherever they can.”David Brown, commercial director of LSL Property Services comments: “Given the frailty of the wider economy and the lingering threat of the eurozone crisis, the improvement in the level of lending towards the end of the year was encouraging to say the least – and welcome news for both home buyers and property investors. “While many lenders may be looking at the increasing cost of funding and are cautious about a deteriorating labour market, they have not yet retreated into their shells. In turn, this has allowed many buyers to take advantage of cheap mortgage rates and house prices that are still below their historic highs. “With interest rates unlikely to rise this year, if lenders can maintain this momentum in spite of the economic difficulties facing the country, we may see an improvement in housing market activity as the year progresses.”