Article
Mortgage lending rises significantly in July
• Number of mortgages up 19% year-on-year
• Loans for first-time buyers up 22%
Mortgage lending for house purchases showed its first significant increase since early 2007 in July, according to the latest Council of Mortgage Lenders' survey.
Homebuyers took out a total of 56,000 loans totalling £7.5bn, 24% more than in June and 19% more than in July last year. The value of those loans was up 27% on June's figure, and 6% higher than in July 2008.
The number of first-time buyers successfully applying for loans also increased by 18% in July compared to the previous month, and by 22% compared to July 2008, to 20,400.
But while remortgaging increased by 21% in July compared to June, the percentage was still 53% down compared to July 2008.
More than three quarters of mortgages taken out in July had fixed rates, with borrowers able to lock in to an average fixed rate of 4.7%, substantially below the average of 5.57% during the past decade.
Paul Samter, CML economist, said: "It's tempting to call the turn in the mortgage market at this point, and there is certainly concrete evidence that lending for house purchase is increasing. But there are still constraints affecting the lending industry's capacity to fund increased lending, as well as less consumer motivation to remortgage for the time being.
"The overall lending picture is likely to stay relatively subdued for some time, especially as the wider economy is far from robust as yet."
The CML survey follows further news of house price increases from Halifax last week, which reported a 0.8% rise in house prices during August, and a 1.7% increase during the past three months, although prices were still actually 10.1% down on July 2008.
In contrast, asking prices are up this July compared to last, according to a house price and affordability index produced by website FindaProperty.com. This showed an average annual increase in asking prices for the first time in 2009, at £218,134 compared to £217,622 a year ago.
The website said this was a result of six consecutive months of stable or positive monthly price growth, as buyers take advantage of good value in the market with renewed confidence.
Properties with three, four or five bedrooms suitable for existing owners wanting bigger homes are 6.61% higher than a year ago. The website believes this is likely to reflect the fact that many existing homeowners still have substantial equity in their properties, so are able to access the mortgage market fairly easily despite tighter lending criteria.
But flats and entry level properties were still showing annual price falls of 4.6%, reflecting the struggle that many first-time buyers are having to get mortgages. First-time buyers have also been hardest hit by the retracted employment market, reducing demand for entry level homes and therefore impacting values.
However, the falling prices at the lower end of the market mean that the 'affordability gap' - the cash deposit needed to a buy a typical first home after obtaining a mortgage achievable with average first-time buyer household income - is £11,148 smaller than at the start of the year.
The website says the size of the gap has plummeted since January but now appears to be bottoming out, suggesting now is the time for first-time buyers to enter the market.
Michael O'Flynn, director of FindaProperty.com, said: "While first-time buyer affordability is clearly improving, they remain constrained by the income multiples offered by lenders and still need to raise very substantial deposits amounting to more than a third of the value of the home they wish to buy.
"The majority of those who are able to seize this buying opportunity will still be relying on the bank of mum and dad to raise the cash they need."