The figure is the highest since records began in 1974 and includes both remortgagors and home buyers. It illustrates a dramatic shift away from the pre-2007 figure when 30% of first-time buyers took out interest-only loans.
The CML said the shift signals lenders moving ahead of possible regulatory change and the recognition repayment mortgages may be in the best interests of less experienced borrowers such as first-time buyers.
Alan Lakey, partner with Highclere Financial Services said with a variety of lenders pulling back or continuously changing criteria it makes life very difficult for brokers.
“I don’t know where the market is going but I think interest-only remains a really valid tool for those want to downscale their current lifestyle in anticipation of future changes,” said Lakey.
“For many first-time buyers it’s the only way to get their foot on the ladder.”
Meanwhile, the October mortgage lending figures show a 6% fall in value in September and 16% lower than 2009, when borrowers were trying to buy before the end of the Stamp Duty holiday.
Remortgaging also declined with 26,000 loans advanced in October, down 9% on September with loans to first-time buyers also falling 9% in value.
However, the average first-time buyer loan-to-value rose from 76% to 80% helped by the recent fall in house prices. The average LTV for homemovers rose from 67% to 69%.
Michael Coogan, director general of the CML, said: “With 2009 lending levels artificially inflated by the end of the Stamp Duty holiday, we expected to see a decline in lending year-on-year, so today’s figures are not surprising.”
He added: “Consumer confidence has also been affected by October’s spending review, despite the relative affordability of monthly mortgage payments, and so a stable but small lending market will continue for some time to come.”
