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Mortgage market shows signs of life - despite euro uncertainty


Published: 18 October 2011 | Author: Bernard Clarke

Recent lending figures showed welcome signs of life in the UK mortgage market, despite continuing uncertainty in the euro zone. House purchase lending to first-time buyers and movers – as well as remortgaging – all saw an increase in activity in August.

The number of loans to first-time buyers totalled 19,000, worth £2.4 billion, an increase over July of 5% by number and 4% by value. Compared with a year ago, meanwhile, the value of lending to first-time buyers was 9% higher.

For movers, lenders advanced 33,000 loans in August, worth £5.5 billion, an increase over July of 8% by number and 10% by value. Lending to both first-time buyers and movers was at its highest for over a year.

Remortgaging showed a similar month-on-month increase. Lenders advanced 34,100 remortgage loans, worth £4.2 billion, 9% higher by number and 5% by value than in July. But perhaps the most striking comparison was with remortgaging a year ago, with activity 30% higher than in August 2010.

Lending criteria for first-time buyers and movers showed little change. But the continuing decline in borrowing costs meant that, while movers continued to pay an average deposit of 31%, their monthly mortgage payments dropped to 9.4% of their income – the lowest proportion since monthly records began in 2002.

First-time buyers continued to pay an average deposit of 20% of the value of the property. Typically, they borrowed 3.2 times their income, up slightly from 3.17 times income in July.

With those moving house now paying a record low proportion of their income in mortgage interest, it is clear that the low rate environment is continuing to benefit borrowers, despite the persistence of a gloomy backdrop in the wider economy.