In May, house purchase lending increased by 36% compared to April and 29% compared to last May.
The number of loans also increased, by 33% from April and by 24% from a year ago.
Remortgage lending also increased in May with £3.5 billion advanced for remortgage. This was up from £3.1 billion in April but down from £3.8 billion 12 months ago when there was a greater expectation of interest rate rises.
First-time buyer activity bounced back following the volatility of March and April. 18,100 loans, worth £2.3 billion, were advanced to first-time buyers in May, up from 12,700, worth £1.5 billion, in April.
This may be a 43% rise (53% by value) from April but, following the distorting effects of the end of the stamp duty concession, this returns first-time buyer lending back to a similar level seen in the second half of 2011.
The characteristics of first-time buyer loans began to return to normal after March and April’s stamp duty effect. First-time buyers on average took out a loan of £104,000 in May, up from £97,750 in April.
They also borrowed 3.21 times their income, up from 3.12 in April and they paid 19.6% of their income in capital and interest payments, up from 19.1%. All of these May figures are more in line with the typical experience over the last year.
The proportion of first-time buyers buying properties valued at between £125,000 and £250,000 rose from 37% in April to 44% in May, but was not quite back at the norm of around 50% seen since 2007.
Lending to home movers also increased with 30,200 loans taken out, worth £4.9 billion. This was up 29% by number and value compared to April and up 25% (29% by value) from May 2011.
Repayment loans continue to dominate within all groups. 98% of loans taken out by first-time buyers were on a capital repayment basis, unchanged since March, 87% of home movers took this option, up
from 85% in April and 82% of those remortgaging also did, unchanged since April.
CML director general Paul Smee said:"It is positive news for the market that the slump following the end of the stamp duty concession seems to have been short-lived. Lending is similar to late 2011 levels and showing a healthy improvement on the same time last year.
"However, the problems in the Eurozone have not gone away. Economic uncertainty could affect both the supply of mortgage lending and consumer confidence and we still anticipate a challenging lending environment for the rest of the year."
Charles Haresnape, managing director of Aldermore Residential Mortgages, added:"It's good news that ending the stamp duty concession appears not to have held first time buyers back permanently and the significant jump in May's figures confirms that there is still life in the mortgage market. However, first time buyers still need as much support as possible and it will be good to see more lenders participating in NewBuy and offering schemes to help borrowers struggling to find a deposit."
And Peter Rollings, CEO of estate agent Marsh & Parsons, said: “The short-term trough in lending caused by the end of the stamp duty holiday may have thankfully been and gone, but the longer-term weakness in the mortgage market remains. It’s still incredibly tough out there for first-time buyers looking to secure a big enough mortgage to purchase their first home, and the housing market is being supported by cash buyers and the equity-rich - especially in the capital where prices are in a league of their own. While there is still strong appetite from new buyers eager to leave the increasingly expensive private rented sector, lenders’ ability to match this demand is being undermined by the impact of the eurozone crisis. Unless the funding for lending scheme proves to be a significant success, the improvement seen in May is in danger of being just a flash in the pan.”
And Nick Hopkinson, director of PPR Estates, said: “Reading the latest press release from the CML you would be forgiven for thinking the property market is flourishing. However, the volatility of the monthly mortgage stats over the last quarter remains heavily influenced by the stamp duty increases at the end of April. When combined with the long, three to five month lead-time it is currently taking to complete a typical property transaction, this makes comparing month on month, and comparing with May last year, disingenuous at best in terms of claiming real market growth.
“The average monthly gross lending figure over the last three months, according to the CML records, is only £11.5 billion. This is down by 3% on the same period last year and significantly less than half the volumes of lending we were seeing pre-credit crunch. Removing the ‘spin’, this is a much closer reflection of the struggling property and mortgage market that we are likely to see for the remainder of 2012 and beyond, particularly while the credit crunch and wider recession remain fundamentally unresolved.”
Brian Murphy, head of lending at Mortgage Advice Bureau, said MAB’s own figures for May reflected those released by the CML.
He added: "After the surge in activity in March – as first time-buyers rushed to beat the end of the stamp duty exemption – we saw a relative lull in April before application levels bounced back in May to their highest level so far this year.
“However, we expect external factors to play a major part in activity levels in the next few months, with activity levels to continue to fluctuate. Alongside the faltering economic situation we are also seeing major distractions such as the Jubilee celebrations and the unseasonal wet weather having a negative impact on activity.
“MAB welcomes the initiative announced by the Bank of England aimed at stimulating lending to businesses and consumers and we hope this quickly feeds through to mortgage lending in the form of greater product choice and competitive rates.”
