FTB lending
First-time buyer affordability changed fractionally, with first-time buyers typically borrowing 3.39 times their gross income, compared to 3.40 in September. The typical loan size for first-time buyers fell slightly month-on-month to £125,800 in October, down from £126,000 in September. The typical gross income of a first-time buyer household changed slightly to £38,820 in October from £38,714 in September.
First-time buyers in October paid 19.5% of gross income towards covering capital and interest payments, little changed from 19.6% in September but still significantly less than the recent peak of 24.8% in December 2007.
Alan Cleary, Managing Director of Precise Mortgages commented: “First time buyers have seen a further boost today with CML figures revealing a 12% month-on month lending increase.
With fundamental reforms to stamp duty announced in this month’s Autumn Statement we expect to see the first time buyer market continue to lift in the New Year. The move is an encouraging sign for industry and consumers alike, and should bolster confidence overall. However, we must ensure all prospective homebuyers reap the benefits.
At Precise we know first-hand that freelancers and self-employed people are groups in particular that often struggle to gain support and credit from mainstream lenders. That’s why we need to be certain that as an industry, even with changes to stamp duty, we are still doing everything we can to support credit-worthy individuals on the property ladder.”
BTL lending
There were 19,600 buy-to-let loans in October, representing lending of £2.7bn. The number and value of these loans were up compared to September both by 8%. Compared to October 2013, this was a 22% increase by volume and 29% by value.
Within the overall total of buy-to-let loans in October, 9,900 were advanced for house purchase and 9,500 for remortgage. The number of buy-to-let house purchase loans increased by 13% compared to September and up 20% compared to October last year. This totalled £1.2bn in value, up 10% on September and up 28% on October last year.
The number of remortgage loans increased in October, up 3% on September and up 23% compared to October last year. These loans had a total value of £1.4bn, up 2% on September and up 26% on October last year.
Paul Smee, director general of the CML, commented:
This has been a year of change for our industry, but the market has shown remarkable stability with house purchase and buy-to-let lending showing steady, consistent growth throughout 2014 compared to 2013. There have been fluctuations month to month but overall the market appears to be showing a positive direction of travel going into the new year.
Stamp duty reform was long overdue and it is welcome that the tax has been changed. It will now be interesting to see how the market reacts; the new structure should be less of a barrier to mobility for those looking to get on the housing ladder or movers looking to switch homes."
Peter Williams, Executive Director of the Intermediary Mortgage Lenders Association (IMLA), comments:
2014 has been a year of shoring up the foundations of the mortgage market, so it is no mean feat to be approaching the home straight with gross lending of around £210bn in sight.* The market has weathered a considerable amount of upheaval this year without grinding to a halt. While there are issues to be ironed out, it is reassuring to see that lending activity has still grown and the recovery has maintained its upwards trajectory – albeit at a slower pace.
The looming election and interest rate rise are both important factors that will impact the growth potential of the market in 2015. One safe bet is that brokers will be kept busy as the balance of power and influence shifts in their direction. As we have already seen, they are involved in a growing number of mortgage transactions and are proving a vital ally for consumers following the Mortgage Market Review (MMR). People are increasingly motivated to look for expert guidance and advice on a far broader range of products than they can access direct from any one lender.”
David Newnes, director of Your Move and Reeds Rains estate agents, comments: “First-time buyers have been forging ahead in the market this year. But more recently lending to new buyers is starting to wane. Mortgage market measures introduced in April have trimmed back lending since, coupled with the ongoing debate about when interest rates might rise and the LTI cap this has discouraged buyer demand. The recent stamp duty changes could be a shot in the arm, helping revitalise activity at the lower levels of the market and offering attractive savings enabling more buyers to enter the market more quickly.
"But in many parts of the country outside of London, the average price paid for a starter home is far shy of even the first stamp duty band. For these first-time buyers, the tax changes are pie in the sky, and won’t have much impact on the ground. Here, where property is already more affordable, finding a large deposit is the hardest challenge. So away from the south-east corner of the UK, Help to Buy and higher LTV lending remain the vital tonics, helping new buyers swallow the up-front costs of climbing onto the property ladder, by making the deposit more manageable.”
