The gross value of remortgaging during the year was 50% higher than in 2002 (£120.8 billion compared with £80.6 billion), while gross lending for house purchase was only 3% up on the previous year (£121.8 billion compared with £118.2 billion).
However, lending for house purchase appeared to show some recovery in the final quarter of the year. In the month of December it accounted for £12.0 billion of lending, 51% of the total - the first time it had passed the 50% mark all year. Earlier in the year it was as low as 40%, the lowest level for ten years. Remortgaging declined in December to £9.1 billion, 39% of the total.
Affordability problems for first-time buyers were well documented in 2003, and the figures confirm that only 29% of all loans for house purchase went to first-time buyers. This compares with 38% in 2002 and a long-run average of near 50%. In December the proportion of first-time buyers was just 27%. Income multiples have continued to be pushed upwards, for both first-time buyers and movers. The typical income multiple for a first-time buyer was 2.91, compared with 2.71 in December last year. For movers the typical income multiple was 2.83, compared with 2.62 in the same month last year.
As the pricing of fixed rate products continues to rise in relation to variable rate products, their popularity has seen a marked drop-off over the last quarter of 2003. Fixed rate products were taken out for 30% of loans in the fourth quarter of 2003, compared with 45% in the previous quarter. Pricing of fixed rate products rose on average from 4.30% in November to 4.52% in December, against an average rate of 4.36% on new variable rates in December.
Commenting on the figures, CML Director General Michael Coogan said:
"The December figures complete the picture of a truly extraordinary mortgage market in 2003. Total lending managed to increase by nearly a quarter compared with the previous year, and has more than doubled in three years. But the bulk of this growth has come from the remortgage market, as lending for house purchase has suffered from affordability constraints created by rising house prices.
"In the run-up to David Miles' recommendations to the Chancellor on fixed-rate mortgages, due to be published by the time of the next Budget, it would be difficult to argue that the active remortgage market is a cause of detriment to most consumers. Indeed, it has enabled many to take advantage of better deals - though most people are currently choosing variable rates. The Government therefore has a tightrope to walk in policy terms, as incentivising the development of long-term fixed rates for stability reasons could have the negative effect of reducing the availability of other special deals that are popular with consumers. "
