CML news & views

Remortgaging is holding up well but lending for house purchase is subdued, as the shortage of mortgage funding continues to affect the market.

In the first quarter of the year, remortgaging totalled £33.3 billion, accounting for 44% of all lending activity. That was its highest share in three years, up strongly from 35% in the final three months of 2007. Strong remortgaging is being partly driven by the large numbers of borrowers coming off existing short-term fixed-rate deals.

Lending for house purchase remained subdued in March. There were 46,500 loans for house purchase in the month, 1% down on February but 48% fewer than in March 2007. We expect the number of mortgage completions for house purchase to continue to decline in the coming months, in line with the Bank of England’s data on loan approvals.

Overall, there has been little change year-on-year in overall lending criteria for first-time buyers. In the first quarter of the year, they borrowed on average 89% of the value of the property and 3.35 times their income, down from 90% and up from 3.32 times income a year ago. For movers, there was a slight tightening of criteria, as they borrowed on average 72% of the property’s value and 2.99 times income, down from 73% and 3.01 times income in the first quarter of 2007.

Since the introduction last month of the Bank of England’s special liquidity scheme, there has been a slight easing of conditions in credit markets. However, the London interbank offered rate (libor) remains high relative to Bank rate, and any improvement in credit market conditions will take time to feed through to the mortgage market.