CML news & views

Recent data from the CML shows that the main hurdle for first-time buyers continues to be finding a deposit, not the cost of regular monthly mortgage repayments.

With rates at low levels historically, the proportion of the average first-time borrower’s income spent on mortgage interest payments dropped in November to its lowest level for six years, at 14.4%. But since February, first-time buyers typically have had to put down a deposit of 25%.

Data from our regulated mortgage survey also shows that the proportion of income that a typical home-mover spent on mortgage interest payments dropped to 10.6% in November, its lowest level for 14 years. Apart from a brief period in the middle of 1996, that is also the lowest debt burden on movers since our records began in 1974.

While low interest rates are expected to ensure that mortgage interest payments continue to remain affordable for the overwhelming majority of borrowers, the requirement for large deposits is likely to continue to constrain the market - particularly first-time buyers – for some time to come.

The figures also show that remortgaging declined by 6% in November and was 39% lower than a year earlier. Continuing low interest rates mean that it is unattractive or unnecessary for many borrowers to re-finance.

As a result, remortgaging has fallen sharply in the last 12 months, reversing the trend of strong growth in recent years. The mortgage market is now dominated by lending for house purchase, as it was a decade ago. At the start of this year, lending for house purchase accounted for only 27% of the total – a record low. But despite a small seasonal decline in November, home-buying accounted for 60% of mortgage lending, the highest proportion since 2001.