Tighter lending conditions have continued to suppress the number of mortgages being agreed in the UK, with loan numbers sharply down on last year’s levels.
The Council of Mortgage Lenders (CML) has said that the number of mortgage loans for house purchases rose by nine per cent in April to 50,700 – collectively worth around £7.7 billion.
This compared with 46,400 in March but was way down on the 80,500 agreed in the corresponding month last year – which was the equivalent of around £12 billion in borrowing.
First time buyers appeared to be particularly badly affected by the tougher borrowing conditions, with loans to first time buyers rising by four per cent to 18,500 from March, but which is down 36 per cent from April last year.
At the same time, the deposits put down by first time house buyers rose to 13 per cent, the highest level in over three years.
Gross mortgage lending amounted to £26.1 billion in April, up eight per cent from March following two months of decline, but down five per cent from the same period last year.
CML director general Michael Coogan said he expected the situation to worsen over the coming months and lending continued to dry up.
First-time buyers were lent an average of 3.3 times their income in April, down from 3.35 times the previous month and the lowest level since November 2006, while the size of the average mortgage also fell slightly to £113,490, compared with £114,950 in March.
Home-movers were also hit by the tightening in lending criteria, borrowing an average of 2.96 times their income, compared with three times the previous month.
The average amount they were lent fell slightly to £134,000 from £135,000. Banks and building societies have been steadily tightening their lending criteria since the credit crunch first hit, demanding ever higher deposits from borrowers.
It is now almost impossible to get a 100 per cent mortgage, while products that will lend up to 95 per cent of a property’s value are also rapidly disappearing.
Abbey announced this week that people with only a five per cent deposit would now have to pay their mortgage arrangement fees up front, leaving people taking out its five-year fixed-rate loan needing to find £2,499.
Mr Coogan said: “Monthly house purchase lending volumes continue to be lower than last year’s levels and there will be a further weakening in coming months as recent approvals data has shown.
“The squeeze on mortgage funding has led many lenders to tighten their lending criteria. While tighter criteria make it more difficult for some borrowers to obtain a mortgage, they also reduce risk in a slower housing market.”
People remortgaging continued to dominate the market, accounting for 42 per cent of the total, as large numbers of homeowners come to the end of short-term fixed rate and tracker deals.A total of 83,000 people remortgaged during the month, 14 per cent more than in March, collectively borrowing £11 billion.
There was also a slight shift among homeowners to opt for fixed-rate mortgages rather than variable rate ones that move up and down in line with interest rates.
Around 59 per cent of all loans taken out during the month were fixed-rate deals, up from 54 per cent in March and the highest level since December.
The CML said this trend was likely to continue as high inflation reduces the scope for the Bank of England to reduce rates, with some economists even speculating the next move could be up.