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Market still very weak, says CML

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  • 13/09/2010
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The housing market continued to be subdued in July, as demand for mortgages failed to match seasonal expectations, according to the CML.

CML figures showed that 56,000 mortgages worth £8.4bn for house purchase were advanced in July, up from 52,000 in June and 53,000 for the same period of 2009.

However, July is traditionally a strong month and, despite the seasonal increase in activity, the CML said the volumes still represented a very weak market.

Remortgage loans were unchanged from June at 28,000 worth £3.5bn, down from 40,000 worth £4.9bn in July 2009.

Loans to first-time buyers declined slightly in July to 19,400 worth £2.4bn compared to 19,700 loans in June and 21,100 in July last year.

The CML said the fall could be partly down to a tightening of loan criteria after an easing in the early part of the year. First-time buyers put down an average deposit of 24% in July, unchanged from June, but up from a recent low of 21% in April and May.

Nevertheless, low interest rates have resulted in mortgage payments hitting their lowest proportion of income since early 2004 at 13.2%, down slightly on June.

Yet, first-time buyers’ share of the market has fallen from 38% in June to 34% in July, the lowest proportion since before the credit crunch began in August 2007.

Lending to homemovers jumped 13% in volume in July to 36,900 loans and 15% in value to £6bn compared to June. This was up 11% in volume and 20% in value from July 2009.

Homemovers, like first-time buyers, have also seen their average deposits rise from 33% in June to 35% in July, yet mortgage payments as a percentage of income have held steady at 9.6%, still the lowest shares since the early 1970s.

Repayment mortgages remained very much in favour in July, with 90% of first-time buyers taking out a repayment deal compared to 67% in July 2007, and 72% of home movers and 70% of remortgagors also choosing a full repayment mortgage.

Paul Samter, economist for the CML, said: “The increase in the prevalence of repayment mortgages is likely in part to reflect the anticipation of regulatory changes by the FSA 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.”

Richard Sexton, director of business development at e.surv, said: “It’s bad news that overall house purchase lending was so weak in July, but the good news is that’s not turned out to be a UK wide phenomenon.

“The health of Britain’s property market differs very significantly across the regions. For instance, over the year to August 2010, e.surv carried out 15.4% fewer surveys and valuations in Northern Ireland compared to the year before, but 25% more in London. We carried out 14.4% more in the East Midlands and 1.8% fewer in Scotland.

“Whilst headline national figures are interesting, it would be foolish to think house purchase activity is uniform across the UK.”

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