First-time buyers still struggling reports CML

Loans for first-time buyers continued to decline in July, while remortgaging rose and lending for house purchases held steady, compared with June, show figures from the Council of Mortgage Lenders.

There were 47,400 house purchase loans worth 7.1bn, unchanged from June, representing a 51% fall by volume and 54% by value from the same month last year.

There were 85,000 remortgage loans worth 11.9bn in July, up 14% in volume and 16% in value from June.

The number of loans to first-time buyers declined to 17,300 in July, down 5% from June and 48% from July 2007.

Loans to first-time buyers have declined in the face of tighter lending criteria, as well as the wait-and-see approach now evident in an environment of reduced house prices.

The average first-time buyer had a deposit of 15% in July, up from 13% in June, bringing the LTV ratio down to levels not seen since the early 1980s.

First-time buyers typically borrowed 3.24 times their income, down from 3.33 in June and the lowest multiple since July 2006.

There were 30,100 loans to home movers in July, up 3% from June but 53% lower than July last year.

Home movers typically borrowed 68% of the value of the property, down from 72% in June, and 2.85 times their income, down from 2.94 in June.

The size of the average house purchase loan decreased in July to 120,170, from 125,000 in the previous four months.

Total gross lending rose 5% to 24.7bn in July from 23.6bn in June, but this is a decline of 28% from a year ago and the ninth consecutive monthly year-on-year decline.

Tracker rate mortgages have increased in popularity as borrowers anticipate the next bank rate move to be down; 28% of borrowers took out tracker products compared to 21% in June.

Michael Coogan, director general of the CML, says: Tighter lending criteria have clearly made it more difficult for first-time buyers to enter the market. The stamp duty and shared equity measures announced by the government last week will be helpful to those first-time buyers looking to enter now, but many may be waiting for house prices to stabilise.

Restoring the flow of funding to the mortgage market is crucial to helping the housing market recovery and we look forward to the findings of the Crosby Review at the end of the month.