Mortgage Lending Declined

Mortgage lending, for both house purchase and remortgaging was down in October, according to the latest data from the Council of Mortgage Lenders (CML).

In October there were 46,000 loans for house purchase, worth £6.7 billion, down 4% in number and 6% by value from September.

The total was 16% lower, (12% by value, than in October 2009. That said mortgage lending numbers in the final quarter of 2009 were boosted as buyers brought forward transactions to take advantage of the stamp duty holiday that was imminently ending.

Remortgaging showed a similar pattern. Loans advanced in October were down 9% (11% by value) from September, and 21% lower (24% by value) than in October 2009.

Loans to first time buyers at 17,000 in October were 5% down by volume on September.

On a slightly positive note, loan-to-value ratios have eased slightly.On average, first-time buyers borrowed 80% of the property’s value in October, up from 76% in September.

But the average income multiple to a first-time buyer declined to 3.19 from 3.26 in September. This is partly explained by the recent fall in house prices leading to lower loan amounts being advanced for house purchase.

The same applied to movers. The average loan-to-value for movers was 69%, up from 67% in September, while the average income multiple was 2.84, down from 2.89 in September.

93% of first-time buyers took out a repayment mortgage in October, the highest proportion since records began in 1974. This shows a clear shift away from interest-only mortgages, indicating lenders have been adjusting their loan criteria in anticipation of possible regulatory changes, and a recognition that repayment mortgages may be in the best interests of less experienced borrowers such as first-time buyers.