Lending for house purchase reached its highest ever monthly figure of £13.6 billion – 13 per cent higher than in May, and 40 per cent higher than in June last year. It accounted for 49 per cent of total lending, compared with 50 per cent the previous month and 43 per cent a year earlier.
Remortgaging also showed a substantial though less dramatic rise, up 16 per cent on the month to £10.8 billion in June from £9.3 billion in May. Remortgaging was 4 per cent higher than in June 2003, when it totalled £10.4 billion. It accounted for 39 per cent of total lending, compared with 38 per cent in May and 46 per cent in June last year.
The CML said house purchase is the primary driver of the increase in lending. Lending for house purchase has been growing as a share of total lending for the past year and a half. On a quarterly basis, lending for house purchase stood at 50 per cent in the second quarter of this year, its highest share since the fourth quarter of 2002. The increase in house purchase activity is also reflected in the number of loans. There were an estimated 123,000 house purchase loans in June compared with 110,000 in May and 99,000 in June last year. This was the highest figure since October last year. The total number of loans for house purchase in the second quarter was estimated at 351,000, 25 per cent higher than the number in the same period last year.
Income multiples for the typical first-time buyer crept over three times income for the first time in June. And movers borrowed a typical 2.82 times income. The CML said while low interest rates mean that debt-servicing costs remain affordable relative to their peak in the late 1980s and early 1990s, it is nevertheless clear that affordability is worsening.
The spread of pricing between fixed and variable rate products narrowed in the month, a result of some attractively priced fixed-rate deals in conjunction with the effects of base rate increases being reflected in variable rates. During June the typical new fixed-rate mortgage was priced at 5.14 per cent, just 3bp higher than the typical variable rate. Accordingly fixed rates rose slightly in popularity, with one in three mortgages advanced in the month being a fixed rate. But the CML added that this is a long way below the recent peak in popularity of fixed rates last August, when take-up was 47 per cent.
CML director general Michael Coogan said: "The signals in the housing market are mixed at present. June saw a bounce back to record lending levels, with an especially strong resurgence in lending for house purchase.
"But however you look at it, in an environment of rising interest rates and rising house prices, there will come a point where affordability constraints mean that lending growth slows down. Early evidence from estate agency surveys suggests consumer appetite is already beginning to turn. But it may still be another few months before the lending surveys reflect this."
