Mortgage Market Still 'Subdued'

Demand for mortgages remained weak in July, according to the latest figures released by the Council of Mortgage Lenders.

The new figures showed that there were 56,000 loans for house purchase advanced in July, an increase of 7% from the previous month. However, the CML said: "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."

Remortgage loans remains unchanged from June at 28,000. However, loans to first-time buyers fell to 19,400. The CML said that loan criteria had now tightened, after having eased during the early part of the year. First-time buyers put down average deposits of 24% in the month, unchanged from June, but up from a recent dip of 21% in April and May.

However, the CML said that low interest rates meant 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.

The proportion of first-time buyers dropped to 34% in July, down from 38% in June. This is the lowest proportion since before the credit crunch began in August 2007.

The CML also said that the take-up of full repayment products had 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. The figures also showed that 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."

(KMcA)