Lowest house purchase mortgages for thirty four years

In a report published today, the Council of Mortgage Lenders (CML) reported the lowest number of new mortgages for house purchase in the last thirty four years. At 516,000, the number is the lowest since 1974 and represents a fall of nearly half on the figures published for 2007. On a monthly basis the figures show a decline of 5% on November which is the lowest figure since monthly records started being recorded back in 2002. With the Royal Institute of Chartered Surveyors reporting stagnant market conditions last week, it is feared that when figures are available, January will set yet more new records of decline.

The CML report does not have any better news to report as far as remortgages are concerned. The number of remortgage loans fell 26% between November and December which also represented a year on year reduction of around one half. One of the main reasons for this is reported to be the attractiveness of lenders standard variable rates when compared to the schemes being offered to new customers. In the case of large lenders such as Lloyds and the Nationwide, the standard variable rate has a true cost significantly less than any remortgage option being offered by the lender. As standard variable rates invariably have no Early Repayment Penalties, many borrowers are finding the very best deal is to stay just where they are.

The report goes on to suggest that first time buyers may almost be an extinct species. With a total of 12,100 new loans and an average deposit of 22% the figures again rewrote the record books. The size of deposit itself is reported to highest ever based on records kept over the last thirty four years. The fact that first time buyers borrowed an average of 3.1 times their income and spent just over 17% of their income on interest payments shows that availability and not affordability is the issue of the moment.

The CML recognise that the availability of mortgages at sensible prices to those who wish to buy property is what is needed to get the markey moving. It is especially important that first time buyers with traditional size deposits of 10% or even 5% are able to access finance, as they are the catalyst to the whole system. Whilst the CML recognise what the problem is, there seems to be a reluctance to appreciate that it is their members who will have to make the first move, and soon. Michael Coogan, CML director general, said:

"The shortage of mortgage funding and reduction in the number of active lenders has reshaped the mortgage landscape in the space of a year. This low level of transactions is insufficient for the functioning of an efficient market.

"Measures are now in place to seek to restore the flow of funding to the mortgage market, but this will take time to feed through. Further action may still be necessary to increase transactions, stabilise prices and restore confidence."

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