House purchase lending up 45%

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House purchase lending increased by 45% in March, marking the ninth consecutive month of year-on-year growth, according to the Council of Mortgage Lenders (CML).

Loans for house purchase were up 25% in volume (45,000) and 24% in value from February but for the first quarter of the year as a whole, there were 112,000 loans for house purchase, down from 171,000 in the final quarter of 2009.

However, the CML suggests no trend can be inferred from this, given the distortion caused by the end of the stamp duty holiday in December.

First-time buyer activity is rebounding faster than homemover activity with 17,300 loans to first-time buyers in March, up 27% on February and 42% year-on-year.

March also saw those getting a foot on the property ladder borrow an average 76% of the property value, which the CML interprets as a “tentative sign” of easier lending criteria.

Furthermore, first-time buyers needed just 13.3% of their income to cover their interest payments, the lowest proportion since 2004.

Remortgaging activity was down an annual 29% in March, as the market remained “moribund”.

Commenting on the data, CML director general, Michael Coogan, says: “Today’s figures indicate there is currently some momentum to house purchase lending, but for the sake of the future health of the housing and mortgage markets, the new government will need to focus on the critical issue of funding and how to address the issues arising from the repayment of the emergency support provided during the financial crisis.”

He adds: “The UK is at risk of a chronic under-supply of credit – and the rationing of mortgages for customers – for years to come.”

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