New mortgage lending down 59%
The Council of Mortgage Lenders (CML) has reported that in November, new mortgage lending continued to fall.
The number of new home loans approved fell 17% on October to 33,000 and was 59% below the level recorded in November 2007.
The outlook for the next few months is bleak, with the CML predicting that lending will fall further.
The organisation’s director general, Michael Coogan, blames limited funding and reduced consumer demand and is not expecting the flow of funds to the mortgage market to improve during 2009, without further government intervention.
In November, first-time buyers had to stump-up their largest deposits for at least 35 years, with an average 18% of a property’s value demanded by lenders, offsetting the benefits of lower interest rates for some.
According to the CML, lenders are using large deposits as a means of rationing mortgage funds and reducing the risk of negative equity.
During the month mortgage affordability improved; interest payments demanded 18.2% of the average first-time buyer’s income, while for homemovers the proportion stood at 14.4%.
Mr Coogan advises those who are benefiting from lower rates and reduced monthly repayments to overpay if possible and protect themselves against falling house prices.
He adds that this is a good time for borrowers on interest-only loans to switch to repayment mortgages and begin paying off capital.
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