CML reports monthly fall in lending

Data released by the Council of Mortgage Lenders (CML) clearly shows the impact that ongoing financial turmoil is having on the mortgage market.

First-time-buyers typically took out loans for 88% of the property’s value in January, down from 90% in December and January 2007. Home movers typically borrowed 70% of the property’s value, down from 73% in December and 72% in January 2007.

The average first-time buyer borrowed 3.32 times their income, down from 3.38 in December and 3.31 in January last year. Home movers typically borrowed 2.97 times their income, down from 3.04 in December and 3.0 in January 2007.

The number of loans for house purchase continued to decline in January totalling 50,300, a 19% fall from 62,000 in December, and 34% lower than 75,800 in January last year. The value declined to £7.8 billion, a 17% fall from £9.4 billion in December and 31% lower than £11.2 billion in January 2007.

But there was an increase in remortgaging activity with 85,000 remortgages, up by 43% from 59,000 in December.

The move away from fixed-rate products towards trackers has continued; reflecting consumer expectations of further base rate reductions in 2008. Fixed-rate loans represented 57% of loans in January, down 20 percentage points from 77% in June/July 2007.

According to our figures, only 39% of first-time buyers avoided stamp duty in January and 11% were caught in the higher bands. These numbers have increased significantly in the last two years. As recently as January 2006, 53% of first-time buyers escaped stamp duty and only 6% were captured in higher brackets.

CML director general Michael Coogan said: “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.

“Tomorrow’s Budget presents a perfect opportunity for the government to do what it can to help first-time buyers by raising the stamp duty threshold.

“While we don’t believe there is one silver bullet solution to problems in the wholesale funding markets, we welcome the Treasury’s recognition of the problem and willingness to work with the industry.

“However, we are unconvinced that a new kitemark “gold standard” for mortgage securities is the solution, or that consumers will move to longer term fixed-rate mortgages without financial incentives. We await with interest the outcome of the Treasury’s Housing Finance Review due to be announced in the Budget.”