New CML data reveals historic low for mortgage costs

The latest data from The Council of Mortgage Lenders has revealed that during September the cost of a mortgage in the UK compared against household income fell to a historic low for both first-time buyers and home movers, 17.8% and 17.7% respectively.

Related topics:  Finance
Warren Lewis
15th November 2016
House Prices Down

Affordability metrics for first-time buyers saw the typical loan size decrease to £133,000 in September from £136,400 in August, while the average household income also decreased slightly from £41,000 in August to £40,200.

According to the data, the average amount borrowed by home movers in the UK also decreased to £171,000 in September from £175,000 in August, while the average home mover household income also decreased to £55,100 from £55,400.

While there was a decline in house purchase lending in September compared to the previous month, this is the highest volume of loans and most amount borrowed in the month of September since September 2007.

In total, homeowners borrowed £11.4bn for house purchase, down 7% month-on-month but up 4% year-on-year. They took out 62,900 loans, down 5% on August but up 3% on September 2015.

This was mirrored in first-time buyer lending which saw a decline month-on-month but a 14% increase year-on-year to hit the highest volume of loans in the month of September since 2006.

Remortgage loans saw a decline month-on-month but an increase year-on-year in September. On a quarterly basis, there were more loans advanced for remortgage than any quarter since the third quarter of 2011.

Paul Smee, director general of the CML, commented: "House purchase activity appears to have steadied, we may not be seeing huge increases in activity on the scale of 2013-14 but there is a consistency in the levels in recent months. Mortgage affordability reached an historic low in September, for both first-time buyer and home movers, which partly reflects the re-pricing of mortgages following August’s base rate cut. This should help turn strong appetite for home-ownership into a reality as we approach the closing months of the year."

Richard Pike, Phoebus Software sales and marketing director, had this to say:  “The effect of the slow down on buy-to-let purchases continues to weigh on the overall market with the quarterly statistics showing a 19% reduction on the same quarter 2015.  This is unlikely to change any time soon as landlords continue to assess the return on their investment, against the costs.  

We are more than likely in for a bumpy finish to the year as movers and buyers grapple with rising house prices and the inevitable uncertainty surrounding our exit from the EU.  The internal politics in government regarding the process for leaving the EU is doing nothing to instil confidence, but it is something that we are all going to have to live with for a while.  I think that low borrowing rates will mean the only area where we are likely to see growth in the coming months is in the remortgage market.”

Jeremy Duncombe, Director, Legal & General Mortgage Club, added: “It is encouraging to see that remortgaging figures are continuing to rise on an annual basis. These figures show that borrowers are beginning to regain control of the housing market and make it work for them, as they continue to take advantage of the record low base rate. Lending to first time buyers is following this trend set by remortgaging and is also continuing to rise year on year.  

Whilst month on month lending saw a slight dip across the board, it is important that we take a step back and look at the bigger picture. Both the amount home-buyers borrowed, and the number of loans they took out increased annually. The housing market is still plagued by an overwhelming supply-demand imbalance. This ever-expanding gap is pushing out the average hopeful first time buyer, who is  finding themselves stuck in an inescapable circle of renting. The Government needs to tackle this fundamental flaw in our housing market head on by addressing the lack of supply. We look forward to hearing from the new Chancellor in the upcoming Autumn Statement, as to how they are going to build the 100,000 affordable homes that we have been promised.”

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