The vast bulk of the decrease was in lending for house purchase, while remortgaging fell only marginally. Lending for house purchase accounted for £7.1 billion in January, 29% lower than the December 2004 figure of £10.0 billion, and 30% lower than last January's figure of £10.2 billion. Some of this decline is seasonal, and entirely expected in any January — house purchase lending fell by 23% from December 2002 to January 2003, and by 19% between December 2003 and January 2004. However, the size of the decrease also reflects the recent cooling in the housing market — and house purchase lending accounted for only 40% of total lending in January, compared with 47% in December 2004 and 47% in January last year.
Reflecting the decline in the volume of lending, the number of loans for house purchase fell from 85,000 in December to 63,000 in January, a fall of 26%. This again reflects a seasonal trend, although the size of the fall again also reflects the cooling in the market. The proportion of loans to first-time buyers rose slightly to 30%, up from 28% in December and 27% in January last year — although the actual number still fell from 23,800 in December 2004 to 18,900 in January 2005 (26,200 in January last year), reflecting the sharp reduction in the overall number of loans for house purchase.
Income multiples continued to edge up for both first-time buyers and movers, although they remain lower than last autumn. First-time buyers borrowed an average 87% of the value of their property, against an average 68% for movers. Average fixed and capped rates fell slightly in January although average variable rates rose, but their relative popularity was virtually unchanged, with 58% of borrowers choosing a variable rate and 42% a fixed rate.
Commenting on the figures, CML Deputy Director General Peter Williams said: "These figures show beyond doubt the recent slowdown in the housing market. But, as we have said before, the picture this year is likely to be lumpy rather than smooth, and it is impossible to gauge the future direction of the market from one month's figures. Confidence measures suggest that consumers began feeling more confident again in January, and this coincides with anecdotal evidence from estate agents suggesting a pick up in sales.
"Overall, the picture is consistent with the CML's expectations of a cooler, but still active, housing market. Lending this year will undoubtedly be less buoyant than in 2004, but the decline in lending levels in January reflects a strongly seasonal element and is unlikely to continue to be so marked as 2005 progresses."
