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September 13, 2010    

House purchase lending fails to impress

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by Gill Montia
”House

Demand for house purchase mortgages continued to be weak in July, the Council of Mortgage Lenders (CML) has reported.

In what is traditionally a strong month, there were only 56,000 house purchase loans (worth £8.4 billion), although volumes had increased from 53,000 a year earlier.

Remortgaging activity remained flat when compared with June (28,000 loans) and worryingly, loans to first-time buyers declined to 19,400, down from 19,700 in June and from 20,100 in the same period of 2009.

As a result, the first-time buyer share of the market fell to 34%, its lowest level since the credit crisis began in August 2007.

The CML suggests that loan criteria have now tightened a little, having eased in the early part of the year, with the typical first-time putting down a deposit of 24% in July, up from 21% in April and May.

However, low interest rates mean that for those getting a foot on the property ladder, interest payments are at their most affordable since early 2004.

Finally, lending to home movers picked up in July (to 36,900 loans) but home movers also saw average deposits rise, to 35%, up from 33% in June.

Interest payments as a percentage of income held steady at 9.6%, the lowest share since the early 1970s.

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