LENDING for house purchase rose slightly in May but remained significantly down over the year, new figures yesterday revealed.
The number of home loans taken out rose to 52,700 in May, 4 per cent up on April but 44 per cent lower than in the corresponding month last year, according to the Council of Mortgage Lenders (CML).
Loans to first-time buyers followed a similar pa
ttern, month-on-month growth of 4 per cent overshadowed by a 41 per cent decline on with last May.
The CML said affordability measures remained stable, with the average first-time buyer borrowing 3.3 times their income, compared with just under 3.4 last July. This is due to lenders asking for increasingly big deposits, meaning those able to afford mortgages are less stretched financially.
However, there was a notable slump in remortgage figures, with 71,000 loans, down 14 per cent over the month and 23 per cent lower than May 2007. The fall in remortaging reflected difficulties in the mortgage market, with rising mortgage rates and fees making it increasingly economical for homeowners to switch to their lender's standard variable rate rather than shop around for a new fixed rate when their existing deal ends.
Martin Ellis, chief economist at HBOS, said: "The remortgage numbers are not a surprise, but most providers are doing a lot to help customers who are reaching the end of their deals."
Overall lending fell to £24.5 billion, down 6 per cent from April and 22 per cent from May last year.
The CML data covers only completions and not mortgage approvals. Those fell to a record low in May, the Bank of England recently reported, indicating that the number of loans for house purchase would fall further over the next few months.
Michael Coogan, director-general of the CML, said: "Lending levels continue to be lower than last year and recovery is still some way off, with little sign of the special liquidity scheme increasing the flow of funds to the industry or lowering the cost of funds as hoped."
The CML also revealed that borrower appetite for fixed-rate mortgages had risen, despite the growing cost of fixed deals. They accounted for 66 per cent of all new mortgages, compared with 59 per cent in April.
"The growing popularity of fixed-rate mortgages, despite the relatively high rates, suggests that many borrowers are prioritising certainty in their monthly payments," said Coogan.
Meanwhile, the number of interest-only mortgages has tumbled in the last year, according to Edinburgh-based mortgage company mform.co.uk.
It found that, with lenders tightening their loan criteria, just 20,400 interest-only loans for house purchase were approved in the first six months this year, compared with 31,300 for the same period in 2007.
