| House purchase loans halve in one year |
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| Tuesday, 13 May 2008 | |
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Mortgage lending for house purchase remained subdued in March, mortgage lenders say.
The number of loans for house purchase declined to 46,500 in March, down 1 per cent from 47,200 in February and 48 per cent from 89,000 in March 2007. Shortage of funding The figures, released by the Council of Mortgage Lenders, relate to March mortgage completions and a decline in house purchase transactions will continue in coming months in line with recent mortgage approvals data from the Bank of England. The continued decline in lending for house purchase is partly due to the shortage of funding in the mortgage market as a result of credit market conditions. Gross mortgage lending was £75 billion in the first quarter, down from £83.9 billion in the first quarter of 2007. The number of loans to first-time buyers declined in March to 17,800, down 1 per cent from 17,900 in February and 45 per cent from 32,500 in March last year. Loans to home movers declined to 28,700, down 2 per cent from 29,300 and 49 per cent from 56,300 in March 2007. Borrowers exiting short-term fixed-rate mortgages Remortgaging activity has remained relatively resilient, increasing in the first quarter of 2008 to £33.3 billion which accounted for 44 per cent of gross lending, up from 35 per cent in the fourth quarter of 2007 and the highest share in three years. This is likely to be driven by the large numbers of borrowers exiting short-term fixed-rate mortgages. The proportion of ‘other' lending - predominantly made up of buy-to-let loans and further advances - increased in March to £7.2 billion, accounting for 30 per cent of gross lending, up from £6.3 billion in February and £7 billion in March 2007. The average first-time buyer borrowed 89 per cent of the property's value and 3.35 times their income in the first quarter of 2008, down from 90 per cent and up from 3.32 in the first quarter of 2007. The average home mover loan in the first quarter was for 72 per cent of the property's value and 2.99 times their income, down from 73 per cent and 3.01 in the first quarter of 2007. LIBOR remains high CML director general Michael Coogan said that house purchase transaction volumes will continue to deteriorate in the coming months as recent approvals data from the Bank of England has shown. "Since the introduction of the Special Liquidity Scheme, there has been a slight improvement in credit market conditions with LIBOR (the interest rate charged by banks lending to each other) moving in a more helpful direction. But LIBOR still remains high relative to the Bank rate and any improvement in credit market conditions will take time to feed through into the mortgage market,” Coogan concluded. Related articles
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