Mortgage lending slowed in September

| October 18, 2012
Mortgage lending slowed in September

Despite more mortgages being available, mortgage lending dropped to £11.6 billion in September, a fall of 10 per cent from August and 15 per cent lower than September 2011’s figure.

The availability of mortgages was boosted by the new Funding for Lending Scheme, but there was little demand from either first time buyers or people wanting to remortgage.

The Council of Mortgage Lenders (CML) said the slump was partly due to the Olympics.

Bob Pannell, the CML’s chief economist, said: “There have been hints of demand softening over recent months, but monthly patterns may have been distorted by the Olympics.

“House purchase demand failed to lift significantly in the third quarter, despite much better mortgage availability.

“Remortgage activity continued to languish, in contrast to relatively strong levels a year ago.”

The government’s £80 billion Funding for Lending scheme, which was launched in August, offers low-cost funding to banks and building societies, to encourage them to offer more loans.

However, the cost of underwriting loans remains high, and interest rates on mortgages are still high for borrowers who can only raise a small deposit.

Most of the new mortgages coming onto the market are for buyers with a deposit of at least 20 per cent.

New research by Yorkshire Building Society found that first-time buyers have to save for more than eight years to be able to afford a deposit on a home.

The average amount set aside each month for a deposit on a first home is £248.

At this rate, with a typical easy access savings account offering just 1.25 per cent interest, it would take eight years and six months to raise a deposit of £26,000.

Of the potential home buyers surveyed by Yorkshire Building Society, 56 per cent said they were concerned about raising a deposit, 40 per cent said house prices were too high, and 16 per cent were worried about their credit history.

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