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February 13, 2008    

Light at the end of 2007 mortgage figures

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by Gill Montia

Figures from the Council of Mortgage Lenders (CML) show that affordability for first-time buyers deteriorated during 2007.

By December of last year the typical first-time buyer household was using 20.7% of income to pay mortgage interest, compared with 17.9% in December 2006.

Income multiples for those new to home ownership rose slightly during 2007, ending the year at 3.38, compared with 3.34 in December 2006. However, the figures do not reflect the two recent cuts in the base rate.

Last year 40% of first-time-buyer mortgages were for properties below the £125,000 stamp duty threshold, compared with nearly 50% in 2006.

Turning to the mortgage market as a whole, gross lending increased by 5% to £364 billion in 2007, compared with £345 billion in 2006.

The bulk of the increase was made up of further advances and buy-to-let mortgages, rather than loans for house purchases or remortgaging.

Last year, lending for house purchases declined to one million (-10%). The value of the loans fell by 2% to £155 billion.

In December, 62,000 loans were taken out for house purchases, down 22% from 78,000 in November.

Michael Coogan, CML director general, comments: “The decline in lending appears to be driven more by funding constraints than lower consumer demand. 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.”

He adds: “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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