Remortgage lending falls 14%

The amount of lending for remortgages dropped 14% from April to May to 71,000 loans, data from the Council of Mortgage Lenders reveals.

It was also down 23% from May last year, but the CML’s figures show that lending to first-time buyers and for house purchases held firm.

Loans for house purchase increased 4% in volume to 52,700 from April to May. The value of these loans also increased 2% to £7.9bn.

The number of loans to first-time buyers rose by 4% from April to 19,200, but this was still 41% lower than May last year.

The value of remortgage lending declined by 13% in May to £9.6bn, which represented 39% of all lending compared to 42% in April.

Home movers took out 33,500 loans, up 4% from April, and down 46% from May last year.

Gross lending declined to £24.5bn, down 6% from April and 22% from May last year.

This is the seventh consecutive month that gross lending has been lower than its position a year before.

The CML’s data records activity related to completions. Recent mortgage approvals data from the Bank of England indicates that the number of loans for house purchase will fall further still in coming months.

The CML says affordability measures remained stable in May, but are still well below the peaks of last summer, because those able to obtain mortgages are less stretched financially.

First-time buyers typically borrowed 3.3 times their income, compared with 3.39 in July last year.

Despite fixed rates becoming relatively more expensive, take up has revived.

The CML claims this suggests borrowers are looking for peace of mind over future payments in these uncertain times.

Fixed-rate mortgages increased in popularity in May, accounting for 66% of all new loans, up from 59% in April.

Michael Coogan, director-general of the CML, says: “The growing popularity of fixed rate mortgages, despite the relatively high rates, suggests that many borrowers are prioritising certainty in their monthly payments.

“Lending levels continue to be lower than last year and any recovery is still some way away, with little sign of the special liquidity scheme increasing the flow of funds to the industry or lowering the cost of funds as hoped.”

Coogan adds: “We look forward to an early, positive report from the Crosby review on how the market should address these issues with the support of the tripartite authorities”