New home loans down 49% on the year

New home loans down 49% on the year

The Council of Mortgage Lenders (CML) has reported that the number of mortgages for house purchases fell 49% in 2008.

Just 516,000 such loans were agreed during the year, representing the lowest level of activity since 1974.

In December, house purchase loans slid to 32,000 down 5% on November to the lowest level since monthly records began in 2002.

During the month there were 12,100 loans granted to first-time buyers totalling A?1.4 billion, again the lowest level of activity since monthly records began in 2002.

Meanwhile, remortgaging declined by 26% from November to 40,000 loans.

Commenting on the fall the CML says “the combination of attractive reversion rates and more restrictive lending criteria meant that for many borrowers the best option was to stay with existing deals”.

In December, first-time buyers typically entered the market with a deposit of 22% or the highest proportion of an average property value in the 34 years on record.

The average first-time buyer borrowed 3.1 times income and mortgage interest payments accounted for 17.1% of income.

CML director general, Michael Coogan, describes the shortage of mortgage funding and reduction in the number of active lenders as having “reshaped the mortgage landscape in the space of a year”.

He also believes that the measures now in place to restore funding to the market “will take time to feed through”.

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