Mortgage landscape reshaped in 2008
12 Feb 09
New data from the Council of Mortgage Lenders graphically illustrates the sharp decline in mortgage lending activity over the past year. There were 516,000 house purchase loans in 2008, a decline of 49% from 2007 and the lowest level of activity since 1974. There were 32,000 house purchase loans in December, a decline of 5% from November and the lowest level since monthly records began in 2002.
Table 1. The mortgage market in 2008
| Value of | Value of | Number of | Number of | Number of | Number of |
2008 | 257,700 | 39,700 | 516,000 | 870,000 | 194,200 | 322,200 |
2007 | 363,800 | 108,200 | 1,017,000 | 1,060,000 | 357,800 | 658,800 |
Remortgaging declined by 26% from November to 40,000 loans in December, as the combination of attractive reversion rates and more restrictive lending criteria meant that for many borrowers the best option was to stay with existing deals.
Table 2. Loans for house purchase and remortgage
| Number of | Value of | Number of | Value of |
December 2008 | 32,000 | £4,300 | 40,000 | £5,500 |
Change from November | -5% | -7% | -26% | -26% |
Change from December 2007 | -49% | -55% | -33% | -29% |
The tightening in credit criteria, falling house prices, and the weakening economy have restricted the number of first-time buyers entering the market. In December, there were 12,100 loans to first-time buyers worth £1.4 billion, the lowest levels since monthly records began in 2002.
First-time buyers typically had a deposit of 22% in December, the highest proportion in 34 years of available data. The average first-time buyer borrowed 3.1 times their income and spent 17.1% of their income on interest payments.
Table 3. First-time buyers
| Number | Value of | Average | Proportion of income | |
December 2008 | 12,100 | 1,360 | 3.10 | 17.1% |
| Change from November | -6% | -8% | 3.12 | 17.8% |
| Change from December 2007 | -46% | -54% | 3.38 | 20.7% |
There were 20,000 loans to home movers in December, worth £3 billion. Home movers typically borrowed 70% of the property’s value and 2.75 times their income. Interest payments typically consumed 13.2% of home movers’ income in December compared with 17.9% a year earlier.
Table 4. Home movers
Number of | Value of | Average | Proportion of income | |
| December 2008 | 20,000 | 2,955 | 2.75 | 13.2% |
| Change from November | -4% | -7% | 2.76 | 14.2% |
| Change from December 2007 | -50% | -55% | 3.04 | 17.9% |
Tracker mortgage products increased in popularity in 2008 as official rates declined, accounting for 29% of new loans, compared with 16% in 2007. However, the majority of borrowers continued to prioritise certainty over monthly payments, as 58% of new loans were fixed-rate mortgages, albeit down from 73% in 2007.
Over half of all home buyers (74% of first-time buyers and 44% of home movers) did not pay stamp duty in December. Without the temporary increase of the nil-rate threshold last August, only 40% of first-time buyers and 18% of home movers would have been exempt.
Michael Coogan, CML director general, said:
"The shortage of mortgage funding and reduction in the number of active lenders has reshaped the mortgage landscape in the space of a year. This low level of transactions is insufficient for the functioning of an efficient market.
"Measures are now in place to seek to restore the flow of funding to the mortgage market, but this will take time to feed through. Further action may still be necessary to increase transactions, stabilise prices and restore confidence."
Notes to editors
1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.7 million mortgages in the UK, with loans worth over £1.2 trillion.
2. Data Sources: CML/BankSearch Regulated Mortgage Survey. Table 1 Source*: Bank of England.
3. The January RMS data will be published on Thursday 12 March.
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