Loans for remortgage increased from 25,000 (worth £3.2 billion) in August to 29,000 (worth £3.6 billion) in September. Remortgaging accounted for 29% of total lending in September, the first proportionate increase since May. Despite this rise, there is still little incentive for borrowers to move away from low reversion rates with interest rates remaining low. This, coupled with an inability for some borrowers to access new refinancing deals means there is little prospect of a significant rise in remortgaging in the coming months.
Loans to first-time buyers increased in number by 4% in September to 18,600 (worth £2.2 billion) but were 6% lower by volume and 4% lower by value than in September 2009. In contrast, the number of home-mover loans fell by 2% to 31,600 in September following a 10% fall in August. And the value also fell by 2%, from £5.3 billion to £5.2 billion.
Credit criteria remain tight and the slight easing of loan-to-value ratios that occurred earlier in the year appears to have reversed. First-time buyers borrowed on average 76% of the value of their property, down from 77% in August, while home movers borrowed 67%, unchanged from August.
On a quarterly basis, there were 156,000 loans advanced for house purchase from July to September (worth £23.3 billion), up 13% in volume (17% in value) from April to June and up 1% in volume (9% in value) from July to September 2009. The 83,000 remortgaging loans (worth £10.3 billion) in the third quarter represented a rise of 6% by volume (5% by value) from the second quarter but the number fell by 20% and the value by 19% from the third quarter of 2009.
The number of loans to both first-time buyers and home movers increased in the third quarter by 8% and 16% respectively (values increased by 8% and 21%), but the number of first-time buyers was 5% lower than in the same period of 2009 (with the value of loans advanced staying the same) while the number of home-mover loans increased by 5% (and the value by 12%).
Michael Coogan, of the CML who compiled the latest data, said:
"With lending volumes at historic lows, stability in the mortgage market is the name of the game at the moment. With both consumer demand falling and funding capacity limited, neither supply nor demand look likely to feed through to any significant improvement in lending volumes as we head into winter."
Jonathan Moore, director of easyroommate.co.uk said:
“The mortgage market remains in dire health, and first-time buyers continue to suffer from the drought in achievable and affordable mortgages. Lending remains subdued, and rather than encourage more borrowers, banks are tightening their criteria further. In September the average loan to value for first-timers fell further to 76%, meaning that buyers are having to stump up even greater deposits. And in areas like London, where house prices are overinflated by the increasing demand and lack of supply, this is simply unachievable for the majority. As a result, we are seeing growing numbers of frustrated first-time buyers remaining in rented accommodation like flatshares. This is driving up the number of would-be tenants competing for a place to live. In London alone, there are now eight prospective renters for every room advertised. With mortgage finance conditions unlikely to loosen up any time soon, rental accommodation will remain vital to the housing the UK’s growing population.”
Peter Rollings, managing director of estate agent Marsh & Parsons, said:
“Lending to home buyers continues to bump along the bottom – and there is little sign that this will pick-up in the near future. Those without a large deposit are still facing significant difficulties in securing a mortgage – but many buyers in central London can afford to place a deposit of at least 30%, for instance, which is helping to keep demand buoyant and boost activity. The capital’s market has different dynamics to the rest of the UK – and has been somewhat insulated against the mortgage drought facing the rest of the country. Over half of the purchases made in London are by cash-buyers – a combination of cash-rich UK and foreign investors, who are not constrained by issues of mortgage finance. Nevertheless, the lack of mortgage funding continues to stifle the wider national market. As many banks and building societies begin to focus on repaying the money they received from government ‘bail-outs’, they must not let sensible new lending drop down their list of priorities. The revival of the housing arket – and wider economy – is dependent on lenders encouraging the right borrowers onto the market.”
Have your say on this story using the comment section below