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Signs of growth in house sales as mortgage lending figures show January increase

Figures from the Council of Mortgage Lenders show lending for house purchase reached its highest January total in five years. This looks like an encouraging start to the year for the property market.

38, 300 mortgages were completed for house purchases in January, an increase of 11% compared to January last year. The total value of mortgage lending for January was £5. 7 billion, compared to £5. 2 billion in January last year.

Although the lending figures for January were somewhat lower than those for December, January is traditionally a quiet time for property sales, so this is not unusual.

Both first-time buyer and home mover lending contributed to the rise in January compared to the same time last year, but the increase in lending to first-time buyers was proportionately higher.

It looks as if the various government initiatives to encourage first-time buyers are working, as 42% of all house purchase loans were made to new buyers. A total of 15, 900 loans (worth £2 billion) were advanced to first-time buyers in January, up by 24% compared to January last year (12, 800 loans).

The average loan-to-value ratio remained at 80% for first-time buyers in January – essentially unchanged for over two years.

One sign of encouragement for anyone trying to sell a property is that there was a small rise in lending to home movers in January. A total of 22, 300 loans (worth 3. 7 billion) were advanced to home movers, a 3% rise (by both number and value) compared to January last year.

Following a similar trend to first-time buyer activity, the number of loans advanced to home movers in the first month of the year reached its highest point since January 2008.

Commenting on the data, CML director general Paul Smee said:

“Seasonal factors clearly had an impact on lending figures in January, but it still remains the best start to a year since 2008. Mortgage finance is available and lenders are open for business, allowing more borrowers to take the step into homeownership or move house in line with their needs. “

As mortgage lending underpins the housing market, the number of mortgages and amount of lending are always a significant indicator of movement in the market as a whole. The increase in these January figures over the same time last year does seem to show that there is a welcome upward trend in house sales and purchases.  

This trend is not just confined to the first-time buyer market, but to home movers as well. While the government has been trying to encourage growth in sales of new-build properties, a strong housing market requires activity in the sale of existing properties as well. Little has been done to encourage this sector, for instance by reforming the way stamp duty is charged.

Mortgage lenders have made various moves to encourage more borrowers. Many have introduced imaginative new products over the last few months, interest rates remain historically low, and some of the tighter lending restrictions have been relaxed. Now does seem to be a good time to buy a new home.  

New house starts had declined, but the increase in lending to first-time buyers will be welcome to developers. Recent figures show a growth in the sales of new homes, with the Royal Institution of Chartered Surveyors reporting that the number sold in the three months to February was the highest for two and a half years.

However today’s new buyers will want to know that they will be able to trade up in a few years’ time, and without plenty of activity in the market for existing homes that will not happen.

More steps do need to be taken to encourage buyers in all areas of the housing market – let us see what the budget brings.

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