House purchase lending on the rise

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Lending for house purchases is continuing to rise, according to the latest statistics from the Council of Mortgage Lenders (CML).

Data for November 2015 shows that homeowner house purchase lending totalled £10.7 billion, which represents an 18% increase on the total recorded in November 2014.

First-time buyers

The number of first-time buyers entering the market has also increased across the year, with the amount borrowed standing at £4.2 billion for November last year; up 14% on the previous November.

In total, this came to 27,900 loans, which was up 10% year-on-year in a further indication that first-time buyer activity is increasing.

Lending to existing homeowners moving to a new property also saw a rise, standing at 32,300 loans across the month, which was up 9% compared to November 2014 and totalled £6.5 billion borrowed; a 20% year-on-year increase.

It means that UK gross lending overall in November totalled £20.5 billion, which was up year-on-year by 27% compared to November 2014 and the highest lending level in the month of November since 2007. 

Competitive rates

The CML noted that competitive mortgage rates mean first-time buyers are spending less of their monthly income on mortgage repayments, with this figure standing at just 18.3% in November; the joint lowest average percentage level since tracking began in 2005.

Although activity overall was slightly more subdued compared with the month before, such behavior is typical for the time of year, with the wider picture indicating a steady increase, according to CML director general Paul Smee.

“As expected, mortgage lending activity eased back as the normal dip in the winter months began. There was still growth across all lending types in November compared to the year earlier, suggesting continued improvement. 

“Our forecasts anticipate that gross lending will continue a slow but steady upward trajectory over the next two years.”

Healthy market

The Mortgage Advice Bureau (MAB) echoed the CML’s sentiment, noting that the figures illustrate how the market is in “rude health”.

Brian Murphy, head of lending at the MAB, says that he expects the market to continue growing in 2016, although was keen to note that pressures from across the globe may have a marginal impact on rates and activity in the medium term.

“The US Federal Reserve’s recent hike in interest rates, while being very slight, is significant. When America stirs, the rest of the world takes notice, and it is inevitable that interest rates will eventually rise in the UK.

“This will present a whole new ball game for recent borrowers who have never experienced rising rates. Any changes will be slight and gradual, and rates are likely to remain relatively low for some time: but today’s rock-bottom prices aren’t guaranteed forever.”

It comes after the Royal Institution of Chartered Surveyors (Rics) recently predicted that the average property price in the UK will rise by 6% over the next 12 months, and by as much as 8% in some areas, as buyer interested continues to rise.