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CML comments on first-time buyer summit

Published: 15 February 2011

 The Council of Mortgage Lenders was pleased to attend a constructive discussion hosted today by the Housing Minister, Grant Shapps MP, to consider the position of first-time buyers in current market conditions.

The CML explained that:

  • Current constraints are an issue not just for first-time buyers, but for existing recent buyers and those without a large equity cushion. Funding constraints apply across the whole market. Gross lending in 2011 will be around £135 billion compared to £360 billion at its pre-crunch peak.
  • High loan-to-value lending is very capital-intensive for lenders. Under today's risk-averse regulatory environment, lenders need to hold typically 6-8 times more capital against a 90% loan than a 60% loan. This is bound to have a knock-on effect on the volume and the price of the high loan-to-value lending that is taking place.
  • And consumers are also wary – demand is relatively low – not only because of the relatively higher cost of high loan-to-value borrowing, but also because they are unsure of the future direction of house prices.
  • It’s important that the government considers and understands these underlying drivers before looking towards specific solutions.
  • While mortgage insurance, shared ownership, and product innovation can all potentially play a part, none will provide a “magic bullet” to normalise the mortgage market – for first-time buyers or anyone else. This is likely to be a gradual process as confidence in funding markets and lending decisions is restored in the light of a more stable market environment.

CML director general Michael Coogan commented:

"It is good to see Ministers taking the initiative to discuss how we can look to improve market conditions for first-time buyers. But no-one will be surprised to learn that there is no simple quick fix for a market that has changed fundamentally since the credit crunch. Creative approaches have a role to play in helping to turn market stability into market recovery, and lenders look forward to working constructively both with government and the housebuilding industry as we look to help create the kind of conditions conducive to responsible innovation."

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.

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