Mortgage lending was £1bn lower in May than in April, data released last week by the Council of Mortgage Lenders shows. Gross lending amounted to £23.8bn in May, down from £24.8bn in April but still nearly 9% higher than in May last year.
The drop in gross lending has been driven by a fall in lending for house purchase. This fell by £1.2bn - exactly the amount by which it rose from March to April. Lending for house purchase in fell back to 48% of all lending in May compared with 51% in April. Remortgaging crept back up to 39% from 37% the previous month, but at £9.3bn rose only modestly against April's £9.2bn, and was 17% lower than the £11.2bn in May last year.
The number of house purchase loans fell to 103,000 in May from 118,000 in April. 31% of these loans (nearly 32,000) were to first-time buyers, compared with 28% (33,000) in April. But first-time buyer numbers were a little more positive than in May last year, when there were fewer than 28,000, accounting for 30% of all loans for house purchase.
On average, first-time buyers in May borrowed 88% of the value of their property, and their mortgages totalled 2.99 x their income. Movers on average borrowed 70% of the value of their property, representing 2.9 times their income.
Fixed rates accounted for 30% of all loans in May, capped rates 2%, and variable rates 68% – exactly the same proportions as in the previous month. This was despite a narrowing in the price differential between the average cost of fixed and variable rate loans from 26 basis points in April to 17 basis points in May. The new average variable rate in May was 4.94%, while the average new fixed rate was 5.11%.
CML director-general Michael Coogan says: “This survey and other recent data suggest that the housing market may well have begun to slow down. Reduced affordability, exacerbated by the cumulative effect of rising interest rates, is acting as a natural brake.
“But the under-supply of property, and the continued aspirations of most people to own their homes, makes it likely that house price increases will slow down rather than stop. Recent speculation about the likelihood of a housing market crash has been alarmist and distorting. While no-one is suggesting that the housing market is risk-free, our central forecast and the strongest likelihood remains that house price inflation will fall back to more sustainable levels in the medium-term.”