Mortgage lending up 20% in February 2012

Rise in first-time buyer numbers behind overall increase in lending for house purchases, CML figures suggest.

Mortgage lending for house purchases was up by 20% year-on-year in February, but lenders said the increase may have been fuelled by changes to stamp duty rules in March rather than indicating a resurgence in market activity.
A total of £5.4bn was lent for house purchases – 2% more than in January 2012 and a fifth more than in February 2011. First-time buyers took out 14,100 mortgages worth a total of £1.7bn, while 22,500 loans worth £3.7bn were advanced to home movers.
First-time buyer numbers in February were up by 8% on the previous month and by 18% on February 2011, while home mover numbers were up by 2% month-on-month and 16% year-on-year.
Estate agents and surveyors had reported an increase in interest from first-time buyers in the early part of the year as they attempted to buy a property before the end of a stamp duty holiday on properties worth between £125,000 and £250,000.
Any first-time buyer buying a home within that price bracket before 24 March stood to save up to £2,500 through not paying the tax.
Lenders have also introduced more deals at high loan-to-values, which could also have contributed to the increase in buyer numbers, although the CML’s figures show the average deposit put down by a first-time buyer was 20% – just 1% less than in February 2011.
CML director general, Paul Smee, said: “It is encouraging to see the continuing year-on-year improvement in house purchase lending.
“However, it is not yet clear whether the end of the stamp duty concession will lead to a falling off in first-time buyer numbers, and how much this may be offset by the government’s NewBuy scheme, available to all buying a new-build property.”
Mark Hollands, director of mortgage broker London Money, said he believed the rise in first-time buyer numbers would “almost certainly fizzle out” now the stamp duty holiday deadline had passed.
“While homes are marginally more affordable for some first-time buyers, for the majority of would-be homeowners property ownership remains a pipe dream. Lending criteria are too tough; the deposits required too large,” he said.
The CML figures for remortgages show the number of loans fell by 3% in February and by 13% year-on-year at 25,500. However, just after the period covered by the figures several lenders announced increases to their standard variable rates, so it will be interesting to compare these figures with those for March.
Hollands added: “Clearly there is still a degree of interest rate inertia. Borrowers need to be extremely vigilant about the vagaries of the wholesale money markets which are driving up the cost of their loans.”
Meanwhile, Halifax has released details of its mortgages for buyers who want help with their purchase through the government’s NewBuy scheme.
The scheme offers lenders a guarantee to incentivise them to offer 95% mortgages on new-build properties. Halifax will be offering two deals: a two-year fixed rate at 5.99% with a £999 fee, and a fee-free deal with a two-year fixed rate of 6.39%.
The deals are available through a number of house builders.


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