Mortgage Market Slows

In a report released yesterday, the Council of Mortgage lenders has confirmed that the mortgage market slowed even further in June. In addition to reducing volumes, the figures also indicate that the size of deposits is increasing.

Current market conditions and further shortages of funding have led to a tightening of criteria, and this has resulted in further reductions in the numbers of mortgage approvals. This is reflected in the figures which show that the average homebuyer put down a 22% deposit in June, up from 20% in May.

The cautious approach of both lenders and borrowers was also reflected in the statistics showing the multiple of income borrowed. The average first time-buyer borrowed 3.33 times their income, down from 3.35 in May. While the average home mover borrowed 2.94 times their income, down from 2.97 in May.

The total amount of lending also showed a reduction in June, with gross lending down to £23.6 billion in June, a fall of 4% from May and 32% lower than June last year. Remortgaging proved to be the most popular for the month, accounting for 75,000 loans worth £10.3 billion representing 44% of the total. Loans for house purchase accounted 47,000 loans worth £7 billion which was 30% of the total.

While all parts the mortgage market are suffering a reduction in business volumes, the majority of mortgages continue to be obtained through a broker. The credit crunch had a particularly marked effect in the first quarter of 2008, when there was an increase in the proportion of borrowers seeking the advice of an intermediary. In the second quarter of 2008, 78% of first-time buyers and 61% of home movers used an intermediary to obtain their mortgage. CML head of research, Bob Pannell commented:

"Mortgage lending activity remains relatively weak and will decline further in the coming months as a result of funding constraints and lower consumer demand.

"The majority of lending continues to be to people with larger deposits, which is prudent for borrowers and lenders in a slowing housing market."

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