Mortgage market remains 'very weak', say lenders

Demand for mortgages in July was weak in what is traditionally a strong month, according to the Council of Mortgage Lenders. 

There were 56,000 loans for house purchase (worth £8.4bn) advanced in July, up from 52,000 (worth £7.7bn) in June, and from 53,000 (worth £7.3bn) a year ago.

 
But the July volumes, despite their small improvement from June, still represent a very weak market, said the CML.

On Monday, the Mortgage Advice Bureau reported that applications for mortgages in August were down 12% on those made in July.



Remortgaging failed to show any recovery in July, said the CML. The 28,000 remortgage loans in July (worth £3.5bn) were unchanged from June and down 29% from 40,000 (worth £4.9bn) in July 2009.

Loans to first-time buyers went into decline, falling to 19,400 (worth £2.4bn) in July, from 19,700 (also worth £2.4bn) in June and from 20,100 (worth £2.3bn) in July 2009.



First-time buyers’ share of the market was at 34% in July, down from 38% in June. This is the lowest proportion since before the credit crunch began in August 2007.



The take-up of full repayment products has 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, while 72% of home movers and 70% of those remortgaging also chose a full repayment mortgage in July.



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.”