Mortgage lending for house purchase remained subdued in March but remortgaging levels held up well in the face of funding constraints, according to data released today by the Council of Mortgage Lenders (CML).
The proportion of ‘other’ lending, predominantly made up of buy to let loans and further advances, increased to £7.2 billion, accounting for 30 percent of gross lending, up from £6.3 billion in February and £7 billion in March 2007.
The number of loans for house purchase declined to 46,500 in March, down 1 percent from 47,200 in February and 48 percent from 89,000 in March 2007.
These latest figures relate to March mortgage completions and a decline in house purchase transactions, says the CML, 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 percent from 17,900 in February and 45 percent from 32,500 in March last year.
Loans to home movers declined to 28,700, down 2 percent from 29,300 and 49 percent from 56,300 in March 2007.
Remortgaging activity has remained relatively resilient, increasing in the first quarter of 2008 to £33.3 billion which accounted for 44 percent of gross lending, up from 35 percent 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 average first-time buyer borrowed 89 percent of the property’s value and 3.35 times their income in the first quarter of 2008, down from 90 percent and up from 3.32 in the first quarter of 2007.The average home mover loan in the first quarter was for 72 percent of the property’s value and 2.99 times their income, down from 73 percent and 3.01 in the first quarter of 2007.
CML director general, Michael Coogan said: “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 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.”
