Council of Mortgage Lenders survey shows dramatic decline in home loans as lending criteria tighten

The number of loans to first time buyers fell nearly 50% in July from the previous year, according to a survey by the Council of Mortgage Lenders.

Loans have declined to 17,300 as a result of tighter lending criteria, a fall of 48%.

The average amount of deposit needed has risen to levels not seen since the 1980s, with the average first time buyer placing of deposit of 15%, up from 13% in June.

The news comes as surveyors reported that the number of house purchases has fallen to record lows, with many surveyors reporting only one house sale a week, further hitting profits at housebuilders.

In July, first time buyers borrowed 3.24 times their income, a decrease from 3.33 in June and the lowest figure since July 2006.


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Credit: I See Modern Britain

Loans to home movers have also fallen to half of the number of loans in July 2007, dropping to 30,100. Home movers typically borrowed 68% value of their property, a drop of 4% since June 2008.

Overall there were 47,400 house purchase loans worth £7.1bn in July, representing a decline of more than 50% in value and volume from the same month last year. Average house purchase loans decreased in July to £120,170, down from £125,000 in the previous four months.

While total gross lending rose 5% to £24.7bn in July from £23.6bn in June; this is a decline of 28% since last year.

Tracker rate mortgages have also increased in popularity. The number of borrowers taking out tracker products increased to 28%, an increase of 7% since June 2008.

Michael Coogan, CML director general, said: “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."

A spokesperson from the Housebuilders Federation said: “Getting liquidity back into the market is a priority. It is the most crucial issue in the housing downturn. We are hoping that as a result of the Crosby Review, the government will take action to assist mortgage liquidity.”

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