New CML figures reveal positives and negatives about the UK mortgage market…

Mortgage lending for house purchase remained subdued in March but remortgaging levels held up well in the face of funding constraints, according to data released today by the Council of Mortgage Lenders. The number of loans for house purchase declined to 46,500 in March, down 1% from 47,200 in February and 48% from 89,000 in March 2007.

Gross mortgage lending was £75 billion in the first quarter, down from £83.9 billion in the first quarter of 2007. The number of loans to first-time buyers declined in March to 17,800, down 1% from 17,900 in February and 45% from 32,500 in March last year. Loans to home movers declined to 28,700, down 2% from 29,300 and 49% from 56,300 in March 2007.

Bucking the trend

However, one particular mortgage activity bucked the trend.  Remortgaging remained relatively resilient and increasing in the first quarter of 2008 to £33.3 billion which accounted for 44% of gross lending, up from 35% in the fourth quarter of 2007 and the highest share in three years. This is likely to be driven by the large numbers of borrowers exiting short-term fixed-rate mortgages.

The proportion of ‘other’ lending (predominantly made up of buy-to-let loans and further advances) increased in March to £7.2 billion, accounting for 30% of gross lending, up from £6.3 billion in February and £7 billion in March 2007.

The average first-time buyer borrowed 89% of the property’s value and 3.35 times their income in the first quarter of 2008, down from 90% and up from 3.32 in the first quarter of 2007.The average home mover loan in the first quarter was for 72% of the property’s value and 2.99 times their income, down from 73% and 3.01 in the first quarter of 2007.

Decline will continue

CML director general, Michael Coogan said: “The figures relate to March mortgage completions and a decline in house purchase transactions will continue in coming months in line with recent mortgage approvals data from the Bank of England. The continued decline in lending for house purchase is partly due to the shortage of funding in the mortgage market as a result of credit market conditions.

“Since the introduction of the Special Liquidity Scheme, there has been a slight improvement in credit market conditions with libor moving in a more helpful direction. But libor still remains high relative to the Bank rate and any improvement in credit market conditions will take time to feed through into the mortgage market.”