New mortgage lending falls 35%

Latest figures from the Council of Mortgage Lenders show the number of new mortgages granted in December of last year falling to 62,000.

The figure represents a 35% decrease on December 2006 and brings the number of new mortgages lent in the fourth-quarter of last year to 225,000, the lowest level for the winter quarter since 1995.

The CML attributes the decline to the increased costs of repaying a mortgage and tighter lending criteria. However, the Council is optimistic that 2008 will see an easing of the situation.

Michael Coogan, director general of the CML, says: “Affordability has been stretched further in 2007 but the recent base rate cuts and the expectation of future cuts will ease debt servicing burdens in 2008.”

Adding: “For first-time buyers, the combination of subdued house price inflation and lower mortgage rates means affordability should ease slowly as the year progresses.”

For first-time buyers, December interest payments as a proportion of income remained at 20.7%, the highest level since mid-1991. Those purchasing their first property also had to borrow an average 3.38 times income.

December also saw a decline in the number of remortgages taken out; the figure was at its lowest for at least six years, at 59,000.

Mr Coogan is again optimistic that conditions are now easing for this group of borrowers, following the two base rate cuts since December, stating: “The impact of payment shock on the large numbers of borrowers coming to the end of fixed-rate mortgages will also be less than we anticipated last year.”

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