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Tuesday 02nd of December 2008
March 11, 2008

New home loans hit nine-year low


by Gill Montia
”New

The Council of Mortgage Lenders (CML) has reported that in January, new loans for home buyers fell to their lowest level for nine years, at 50,300.

The figure was 11,700 down on December and 25,500 less than in January 2007.

In August of last year, before the credit squeeze began, there were 103,000 such loans and the steep decline reflects the fact that the financial crisis has made it difficult for lenders to raise the funding that backs their mortgage products.

Michael Coogan, the CML’s director general, says: “The wholesale funding markets remain largely closed and mortgage funding still remains constrained. This is now having a discernible impact on lending criteria and the ability of first-time buyers to get into the housing market.”

Lenders are now asking for larger deposits meaning that in January the average loan taken out by a first-time buyer dropped from £117,921 to £115,000. As a multiple of income, the average first-time mortgage declined from 3.38 to 3.32 times income.

Home movers are also affected, with the average mortgage falling to £134,100 in January, compared with £137,499 in December.

For this group the average income multiple dropped from 3.04 times average earnings to 2.97.

Simon Rubinsohn, a spokesman for the Royal Institution of Chartered Surveyors, comments: “The credit crunch is now having a meaningful impact on the availability of finance for home purchases. Not only is the volume of mortgages falling sharply but loan to value ratios are also being reduced.”

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