Lending for new house purchases plummets
The Council of Mortgage Lenders (CML) has published mortgage lending figures for the first quarter of the year, showing that the number of loans approved for house purchases fell to 142,000.
The figure is slightly above the lowest on record, which was in 1975, when 140,000 home loans were approved in the first three months of the year.
Gross mortgage lending stood at £75 billion in the first quarter, down from £83.9 billion in the first quarter of 2007.
The first three months of 2008 saw the average first-time buyer borrow 89% of the property’s value equating to 3.35 times their income.
The loan-to-value ratio was down year-on-year, comparing with 90% in the first quarter of 2007; the income multiple rose for first-time buyers, from 3.32 in the first three months of 2007.
For home movers, the average loan in the first quarter was for 72% of the property’s value and amounted to 2.99 times income. Both figures were down year-on-year, from 73% and 3.01 respectively.
The CML reported that remortgaging increased in the first quarter of 2008, to £33.3 billion, or 44% of gross lending.
The figure was at its highest for three years and up 35% on the final quarter of 2007, largely as a result of high numbers of existing borrowers coming to the end of their short-term fixed-rate mortgages.
Turning to the month of March, CML figures show that loans to first-time buyers declined to 17,800, down 1% on February and 45% on March of 2007.
Meanwhile, mortgages for home movers fell to 28,700 in March, down 49% on March 2007.
The CML’s director general, Michael Coogan, expects the number of house purchases to continue to decline in the coming months.
He acknowledges that there has been a slight improvement in credit conditions prompted by the Bank of England’s Special Liquidity Scheme but points our that Libor (the rate at which banks lend to one anther) still remains high relative.