CML Reports rising house purchases and re-mortgages.

by Mark Johnston

Recent research has shown that due to the number of loans for both re-mortgages and house purchases increased greatly due to the high demand in the month of May, this may give some indication of the stabilising of the mortgage market.

New figures produced by the Council of Mortgage Lenders (CML) (CML is a non profit organisation and the trade association for the mortgage lending industry) have revealed that there has been a substantial 41,500 loans worth a whopping total of £5.9 billion given in May. This sum was advanced for house purchases in the month of May, this is an increase of up to 700 up from 40,800 (£5.9 billion in value) in April.

Although these figures show a definite increase in the month of May’s house purchase activity, according to statistics this level is recorded as being lower for the same month last year when 43,800 loan advances were given worth £6.3 billion in value.

Figures for re-mortgage lending have not however increased at the same rate as house purchase loans. The re-mortgage lending did increase slightly in May. The 29,000 re-mortgage loans that were advanced the worth was approximately £3.6 billion, this increase is compared to 24,700 re-mortgage loan advances worth £3 billion, given in April.

Re-mortgage lending has increased 9% in value when being compared to May of last year (2010). This remains below the recent peak recorded in March of £4.1 billion.

It is thought that the fall back in activity during the early part of the year was due to the speculation of an increase in interest rates by the Bank of England, but poorer than anticipated data has changed expectations.

Data for the month of May also revealed that 62%, which is the majority of borrowers continued to opt for a fixed rate mortgage this reflects that borrowers felt safer with the certainty of a fixed rate when there is still so much uncertainty within the economy and interest rates.

In May of this year (2011) slightly more than one in five or 22% of all borrowers
choose the tracker mortgage. This was seen as a significant change from that of May last year (2010), when the tracker mortgage was more popular possibly due to lower interest rates set by the Bank of England and fewer borrowers opted for the fixed rate mortgages.

Figures published show that 15,900 first time buyer loans were advanced in May 2011 compared to the 15,800 recorded in April 2011 this shows that first time buyer lending was virtually unchanged in April and May.

The value of these first time buyer loans remained unchanged in May this year
(2011) at 31.9 billion. However when compared to May last year (2010), first time buyer activity has fallen by 2.5% in volume (from 16,300) and 5% in value (from £2 billion).

It has been documented that first time buyers on average borrowed 80% of their
property value in May 2011 this was for the second time in a row.

Data revealed that before 2008 first time buyers typically borrowed 90% of their property value. This shows that the 80% property value borrowed in May was still well below but it has eased a little from the 75% experienced throughout 2009 and early 2010.

Over the coming months seasonal factors are likely to push up lending for house
purchase, said Michael Coogan, director general of the CML.

Research has shown that there is no evidence of any drastic changes on the horizon or any significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year.

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