Borrowers moving home in May saw their mortgage interest payments accounting for the lowest proportion of their income in 35 years, according to the Council of Mortgage Lenders.
House purchase lending rose from a year ago for the 11th consecutive month, but the CML forecasts that with the challenging economic backdrop, government spending cuts and forthcoming tax increases, the positive trend is likely to tail off in the second half of this year.
House purchase lending rose modestly in May. The 42,000 loans (worth £6 billion) were up 2% in volume and 3% in value on April and 15% in volume and 28% in value from a year earlier.
Remortgaging activity recovered a little as well in May. The 26,000 loans (worth £3.2 billion) were up 6% by volume and 10% by value on May but down 14% by volume and by value on a year earlier.
There were 14,800 loans (worth £1.8 billion) advanced to first-time buyers in May, up from 14,500 (worth £1.7 billion) in April and 13,700 (worth 1.5 billion) in April 2009. Their characteristics have changed little in recent months. In May they borrowed an average of 3.14 times their income and 75% of the value of their property but interest payments accounted for only 13.2% of their income, the lowest amount since the 13% of March 2004.
The numbers of home movers increased as well in May. The 27,100 loans (worth £4.2 billion) were up from 26,500 (worth £4.1 billion) in April and 22,800 (worth £3.2 billion) in May 2009.
The characteristics of these borrowers have also barely changed recently but they continue to benefit the most from low interest rates with interest payments accounting for only 9.5% of their income in May, the lowest percentage in 35 years of available data.
CML director general Michael Coogan, said: “House purchase lending continues its recovery but positive comparisons with equivalent months a year ago look unlikely to continue. Activity picked up in the second half of 2009 due to the stamp duty holiday but with the government’s austerity drive picking up momentum we are unlikely to see a repeat of those buoyant numbers this year. Our forecast for gross lending in 2010 may now be looking a little optimistic.”””
