Lending Falls Again Says CML

The Council of Mortgage Lenders (CML) yesterday released data showing how the ongoing credit crisis is affecting the mortgage market. Borrowers have fewer options today and as a result are borrowing less.

Last December, first-time buyers borrowed 90% of the property's value. In January this year, borrowers borrowed less at 88% LTV. Home movers also borrowed less at 70% which is 3% lower than they typically borrowed in December.

The CML report stated, "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."

However, remortgage activity increased as homeowners switched to new deals. 85,000 remortgages took place in January compared to 59,000 in December - a rise of 43%. As consumers anticipate further base rate cuts from the Bank of England, many have switched from fixed-rate mortgages to tracker mortgages.

CML's 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."

Figures from the CML show only 39% of first-time buyers avoided paying stamp duty tax in January yet 11% were charged as they bought homes in higher tax bands. These numbers have risen significantly for first-time buyers compared to January 2006 where 53% avoided stamp duty tax and only 6% were stuck with the higher banding bill.

Published on March 12, 2008