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July sees continuing subdued mortgage market

Published: 13 September 2010

Demand for mortgages in July continued to be weak in what is traditionally a strong month, according to the latest regulated mortgage survey by the Council of Mortgage Lenders.

There were 56,000 loans for house purchase (worth £8.4 billion) advanced in July, up from 52,000 (worth £7.7 billion) in June, and from 53,000 (worth £7.3 billion) a year ago. While this reflects the seasonal rise in activity at what is usually a strong part of the year, these volumes still represent a very weak market.

The 28,000 remortgage loans (worth £3.5 billion) were unchanged from June and down from 40,000 (worth £4.9 billion) in July 2009.

Table 1: Loans for house purchase and remortgage

  Number of
house purchase
loans
Value of house
purchase loans
£m
 
Number of
remortgage
loans
 
Value of
remortgage
loans, £m
 
July 2010 56,000 8,400 28,000 3,500
Change from June 2010 +7% +9% n/c n/c
Change from July 2009 +6% +15% -29% -29%

Loans to first-time buyers declined to 19,400 (worth £2.4 billion) in July, from 19,700 (also worth £2.4 billion) in June and from 20,100 (worth £2.3 billion) in July 2009.

Having eased during the early part of the year, loan criteria have now tightened a little. First-time buyers put down average deposits of 24% in the month, unchanged from June but up from a recent trough of 21% in April and May. But low interest rates mean that interest payments continue to take up a relatively modest share of income. At 13.2% this was down slightly from the previous month and the lowest it has been since early 2004.

First-time buyers' share of the market was at 34% in July, down from 38% in June. This is the lowest proportion since before the credit crunch began in August 2007.

Table 2: First-time buyers, lending and affordability

 

Number of
loans

Value of
loans
£m

Average
loan to value

Average
income multiple

Proportion of
income spent on 
interest payments

July 2010 19,400 2,400 76% 3.14 13.2%
Change from June 2010 -2% n/c 76% 3.28 13.3%
Change from July 2009 -3% +4% 75% 3.10 15%


Lending to home movers picked up in July. There were 36,900 loans (worth £6 billion), up 13% in volume and 15% in value from June and 11% in volume and 20% in value from a year earlier.  

Like first-time buyers, home movers have seen their average deposits rise again -from 33% in June to 35% in July. But their interest payments as a percentage of income have held steady at 9.6% - still the lowest share going back to the early 1970s.

Table 3: Home movers, lending and affordability

 

Number of
loans

Value of
loans
£m

Average
loan to value

Average
income multiple

Proportion of
income spent on 
interest payments

July 2010

36,900

6,000

67%

2.86

9.6%

Change from June 2010

+13%

+15%

69%

2.90

9.6%

Change from July 2009

+11%

+20%

68%

2.76

11.2%

The take-up of full repayment products has remained high for a year. In July, 90% of first-time buyers took out a repayment mortgage, compared to July 2007, before the credit crunch, when only 67% did. 72% of home movers and 70% of those remortgaging also chose a full repayment mortgage in July this year.

CML economist Paul Samter said:

"The increase in the prevalence of repayment mortgages is likely in part to reflect the anticipation of regulatory changes by the Financial Services Authority to limit the availability of interest-only mortgages.

"More generally, lending criteria remain tight, underpinned by caution on the part of both borrowers and lenders in the light of continuing economic uncertainty."

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 94% of all residential mortgage lending in the UK. There are 11.4 million mortgages in the UK, with loans worth over £1.2 trillion.

2. Source: CML/Banksearch.

3. The Council of Mortgage Lenders does not publish statistics for mortgage approvals. The data in our monthly Regulated Mortgage Survey and gross lending press releases relate to mortgage advances only. A mortgage approval is the firm offer to a customer of a specific amount of credit secured against a particular property. A mortgage advance is the total amount of loan actually provided to the buyer, by the lender. Please see the mortgage statistics timeline on our website for further information.

4. The August RMS data will be released on Tuesday 12 October 2010.

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