New mortgage lending plummets

| March 12, 2010 | 0 Comments

There were 49% fewer house purchase loans approved in January than in December, the Council of Mortgage Lenders (CML) has reported.

According to the body, the steep decline “emphatically demonstrates” the impact of the end of the stamp duty holiday, in December.

First-time buyers recorded the largest drop among house purchasers: in January, approvals were down to 11,300 compared with 24,800 in December.

However, January first-time buyer approvals were still up from 8,600 a year earlier and the overall volume of house purchase approvals also showed an improvement at 32,000 (worth £4.7 billion), compared with 23,000 (worth £3.1 billion) in January 2009.

Meanwhile, remortgaging activity declined to its lowest level since the CML’s records began eight years ago.

Borrowers coming off fixed-rate deals continued to revert to lenders’ relatively attractive standard variable rates, either through choice or because of difficulties in remortgaging.

In all 24,000 remortgages were approved (worth £3 billion) down from 45,000 (worth £6.2 billion) a year ago.

For first-time buyers, the proportion of income spent on interest payments fell to an average 13.2% in January (compared with 14.1% in December and 15.9% a year earlier).

Home Movers also gained, with the proportion shrinking to 9.8% (down from 10.2% in December and 11.9% in January 2009).

Commenting on the data, CML director general Michael Coogan says: “When December and January data are taken together, they show little change in underlying market conditions compared with recent months, with activity still slow but well up on the lows of a year earlier.”

He adds: “We expect lending over the coming months to remain weak as uncertainty over of the state of the economy and the upcoming election are likely to continue to hold back housing market activity.”

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