The number of loans for house purchases and remortgages both increased in May, reflecting a mortgage market that appears to be stabilising.
Figures from the Council of Mortgage (CML) Lenders have revealed that there were 41,500 loans worth £5.9 billion advanced for house purchases in May, up from 40,800 (£5.9 billion in value) in April.
Despite the monthly increase in house purchase activity, it is still below the level seen in May last year (43,800 advances worth £6.3 billion).
Remortgage lending picked up slightly in May. 29,000 remortgage loans were advanced, worth £3.6 billion, compared to 24,700, worth £3 billion, in April.
Compared to May last year, remortgage lending has increased by 9% in value, but remains below the recent peak in March (£4.1 billion).
The fall back in activity from earlier in the year can be explained by the lessening possibility of the Bank of England increasing interest rates; a rise seemed on the cards in the opening months of the year but poorer-than-anticipated economic data has changed expectations.
The majority of borrowers continued to opt for fixed rate mortgages in May (62%), reflecting borrowers' preference for certainty when the future of the economy is still in the balance.
Just more than one in five (22%) of all borrowers chose tracker mortgages in May, a significant change from May 2010 when fixed rates were less popular at 46% and tracker mortgages more popular at 36%.
Lending to first-time buyers was virtually unchanged in May, as 15,900 first-time buyer loans were advanced, compared to 15,800 in April.
The value of these loans remained unchanged in May at £1.9 billion. Compared to May last year, first-time buyer activity has fallen by 2.5% in volume (from 16,300) and 5% in value (from £2 billion).
First-time buyers borrowed on average 80% of their property's value in May for the second month in a row.
This is still well below the 90% that first-time buyers typically borrowed before 2008, but has eased a little from the 75% experienced throughout 2009 and early 2010.
"Over the coming months seasonal factors are likely to push up lending for house purchase," said Michael Coogan, director general of the CML.
"There is no evidence of any drastic changes on the horizon or any significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year."
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