Mortgage Lending Supply Still Slow
July 8th, 2008 by 
Guy
Signs of a recovery in the mortgage market is still “some way away”, according to the Council of Mortgage Lenders (CML).
The statement came as figures showed the number of mortgage lending for home purchases remained low in May at 52,700.
This was a small rise from the previous month of 4%, but was still 44% lower than the same time last year.
The figures also revealed a massive decline in the amount of people remortgaging in May - down 14% on the previous month and 23% lower year-on-year.
“Lending levels continue to be lower than last year and any recovery is still some way away,” said CML director general Michael Coogan.
The CML said the situation was likely to “get worse before it gets better”, with first-time buyers facing having to find larger deposits and needing a good credit rating to get a foothold on the housing ladder.
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The amount of loans to first-time buyers rose by 4% from April to 19,200 in May, but was 41% lower than May last year. These buyers generally borrow nearly 3.5 times their income..
Recent mortgage approvals data from the Bank of England indicated that the number of mortgages for house purchase would fall further in coming months, the CML said.
The CML data relates to mortgage completions, as does the latest survey of house prices released by the Department for Communities and Local Government (DCLG).
This showed that annual house price growth has slowed, down from 4.9% in April to 3.7% in May.
Annual house price growth was highest in Scotland, at 6.9%. Prices in England went up by 3.8% and were up 1.5% in Wales, but prices had fallen by 7.8% in Northern Ireland.
The average cost of a home in the UK was £218,151 in May, the DCLG said.
The demand for fixed-rate mortgages has risen, despite the rising costs of this type of mortgage deal.
Lenders blame the cost of inter-bank lending for the increase in costs for new borrowers and those remortgaging, but there has also been some criticism of them being slow to drop interest rates when their own costs have fallen.
Fixed-rate mortgages accounted for 66% of all new loans, up from 59% in April, the CML said.
“The growing popularity of fixed-rate mortgages, despite the relatively high rates, suggests that many borrowers are prioritising certainty in their monthly payments,” said Mr Coogan.
Posted in Mortgage news | 