Home Loan Figures At A Record Low
The number and value of home loans are at their lowest levels since current records began, according to the Council of Mortgage Lenders (CML).
The number of loans granted for house purchases in August dropped to 42,000 - some 59% lower than the same month a year ago.
The value of these loans was £6bn, which was fall from 63% August 2007.
Government measures to help the mortgage market will take time to feed through, the lenders’ group says.
Both the number and value of house purchase loans in August were at their lowest since monthly records began in January 2002.
The more historic quarterly data shows that the number of loans were at their lowest level in the last three months since the third quarter of 1974.
First-time buyers
The number of first-time buyers stepping onto the property ladder has also dropped severely, the CML said.
They faced having to borrow less because of falling house prices, but needed to put down more as a deposit in advance owing to increasingly tight lending criteria by mortgage providers.
The typical deposit put down by first-time buyers in August stood at 16% of the value of a property - the highest proportion since 1980.
The average first-time buyer borrowed 3.18 times their income, down from 3.39 in August last year. They typically borrowed £106,754.
Those moving home were also being squeezed on borrowing in August. The CML said there were 26,600 loans to home movers, valued at £4.1bn.
This was 61% down in volume and 64% down in value compared with the same month a year ago.
‘Positive effect’
There was a slight shift in the proportion of borrowers choosing tracker rates, which rose slightly, while the level of those opting for fixed rate deals in August fell slightly compared with the previous month.
“Fixed rates were higher than tracker rates and rose by more from July to August. Expectations of base rate reductions have also increased, so it is unsurprising to see consumers moving in favour of variable rates,” said CML director general Michael Coogan.
On Monday, the government announced it was injecting £37bn investment into Royal Bank of Scotland (RBS), Lloyd’s TSB and HBOS.
In return it suggested that the three banks return mortgage and small-business lending to 2007 levels.
“The package of measures announced yesterday will have a positive effect, but it will take time for it to feed through to the mortgage market,” said Mr Coogan.
House prices
The value of the average home in the UK was 3.4% lower in August than a year ago, the government’s own figures revealed on Tuesday.
This was down from a 0.3% drop in annual house prices recorded by the Department for Communities and Local Government (DCLG) in July.
The latest figures put the cost of the average UK home at £211,410.
The annual fall for the price first time buyers paid was 4.5% down in August, the figures show.
Prices fell year-on-year in England by 3.4%, were down 4.3% in Wales and dropped 18.6% in Northern Ireland. But in Scotland house prices were 1.3% higher than a year ago, the DCLG said.
Falling prices were led by flats, which dropped in price by 5.1% between July and August, followed by terraced houses (down 3%), bungalows (down 2.2%), semi-detached houses (down 1.8%) and detached houses (down 1.6%).
Mortgage Lending Slump Continues Throughout July
The slump in mortgage lending continued throughout July, according to the latest figures from the Council of Mortgage Lenders (CML).
Total lending stood at £24.8bn, up slightly by 5% from June, but still 27% lower than the same period last year.
Lending to homeowners has slumped dramatically in 2008, because the credit crunch has dried up the supply of funds available to banks.
House sales have dropped by 50% this year and will probably fall further.
“While there was a small month-on-month increase in activity, it represented a notable decline from a year ago,” said Bob Pannell of the CML.
“This continues the weaker picture seen in June and points towards the more subdued levels of lending we are likely to see in the second half of 2008,” he added.
The bulk of mortgage lending this year has been to people who are not, in fact, moving house.
Previous figures from the CML have shown that so far in 2008, only 29% of mortgage lending has been to house buyers.
The rest has been to people staying put but moving to new mortgage deals, such as former customers of the Northern Rock, or to people borrowing extra sums against the value of their homes. A marked contrast to the situation year ago.
In the course of 2007, lending to home buyers was a much higher proportion of total mortgage lending, at 43%.
The slump in home buying in the past 12 months is highlighted by the fact that in June this year, loans for home buyers were less than half the number seen in June 2007.
“Even though the base rate has come down by 0.75% since August 2007, those without higher deposits have seen little benefit with many first time buyers effectively shut out of the market,” said Oliver Gilmartin of the Royal Institution of Chartered Surveyors (Rics).
“Despite the prospect of further interest rate cuts as the economy slows sharply into 2009, tighter lending standards look set to stay,” he warned.
Lenders are continuing to shave the interest rates on their mortgage deals, as the cost of funding has come down in the past month or so.
“In the past few weeks, some lenders have returned to the market,” said Andrew Montlake of mortgage brokers Cobalt Capital.
“The Abbey, Nationwide and HBOS have been having a bit of a battle to get more business in,” he added.
Tomorrow the Abbey is cutting the rates it charges on its two-, three- and five-year mortgage deals, for borrowers who can put down a 25% or 30% deposit.
But these are aimed at customers of other lenders who are seeking a better deal, not at people who are moving house or trying to buy a home for the first time.
“They only have two fixed-rate deals for people with deposits of less than 25%,” said Aaron Strutt of mortgage brokers Chase de Vere.
“Their most competitive deals are for people with at least 25% to put down,” he added.
