Loans to homebuyers ‘23% higher’

The number of mortgages for homebuyers granted in June rose by 23% compared with May, according to UK lenders.

Some 45,000 home loans were granted for house purchases – just 6% lower than the same month the previous year, the Council of Mortgage Lenders (CML) said.

The group said the mortgage market had stabilised, although this was far from a return to the housing boom.

First-time buyers were still being squeezed, as they required an average deposit of 25% of a home’s value.

Low numbers

The CML figures showed that the number of loans granted in June to people buying a house was at its highest level since July last year, when the housing market was already entering the doldrums, and amounted to £5.9bn. 

KEY FACTS
23%: Rise in mortgages for house purchases from May to June
26%: Typical deposit in June
28: Average age of a first-time buyer
40: Average age of a home-mover
Source: CML

“Low interest rates and realistic selling prices have helped generate a welcome increase in transactions. But there is some way to go before we reach normal levels of activity,” said CML economist Paul Samter.

“There are tentative signs that lending criteria are easing, but remortgaging demand is likely to remain subdued whilst interest rates stay at current levels.”

The average house purchase loan rose from £105,000 in March to £111,000 in June, signalling the recent increase in the typical house price.

But there has been little change in the average deposit needed for these loans. This was 25% in March and 26% in June.

Getting on the ladder

First-time buyers – who on average get onto the property ladder at the age of 28, according to the CML – were granted 17,200 loans in June, worth £1.9bn. This was up 26% on the number given out the previous month.

The figure was 7% lower than a year earlier, when the average first-time buyer put down a deposit of 13% compared with a deposit of 25% in June.

“If first-time buyers are coming back to the market, the market can move,” said Ashley Brown, director of mortgage broker Moneysprite.

“There have clearly been some major withdrawals from the bank of Mum and Dad in recent months although when this source runs dry the number of first-time buyer loans could fall again, which will negatively impact the entire market.”

Home-movers had an average age of 40, the CML figures showed, consistent with the long-term average.

The number of loans for remortgaging increased by 13% from May to 34,000 loans in June, with lower interest rates “dampening” the demand for remortgaging, the CML said.

Fixed-rate deals were the most popular form of mortgage in the second quarter of the year, lenders said, making up 78% of new lending in June owing to greater availability.

House prices

The value of properties in the UK rose again in June, according to the Department of Communities and Local Government (DCLG).

There was a rise of 1.6% between May and June, driven by the rise in value of bungalows (up 2.4%) and flats (up 2.2%). The average home was worth £191,423.

The less volatile three-month on three-month measure showed that UK prices rose by 2.6% in the quarter ending in June, compared with a fall of 3.8% the previous quarter.

Prices paid by first-time buyers were 11.7% lower than a year ago, the department’s survey found.

In the year to June, house prices fell by 23% in Northern Ireland, 12.2% in Wales, 10.7% in England, and 7.1% in Scotland.

In the English regions, the price decreases ranged from an 11.5% drop in the South East and Yorkshire and the Humber, to an 8.6% fall in the West Midlands.

A survey by the Royal Institution of Chartered Surveyors (Rics) revealed that the shortage of homes for sale in the UK had propped up prices in July.

The latest survey found that 8% more surveyors expected prices to rise rather than fall further during the next three months. Meanwhile 29% more predicted sales levels would increase.

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