First-time buyers face 25% deposits, remortgagers stick on SVRs
Latest mortgage lending data show the market is remaining in the doldrums as first-time buyers face average deposits of 25 per cent.
Furthermore homeowners are opting to stay on stand their lenders' standard variable rates (SVRs) after a fixed deal rather than remortgage.
The Council of Mortgage Lenders data show a four per cent increase in house purchase loans in February, but lending is still a third of the average number of loans witnessed for the month over the last few years.
A 20 per cent decrease in remortgaging for the month was recorded with the CML saying, "we expect demand for remortgaging to remain muted as lenders' standard variable rates are attractive compared to new mortgage pricing, and house price falls continue to erode equity levels".
Although first-time buyer loans were significantly lower than previous averages for the month, there was a seven per cent increase from January.
However, deposits now typically stand at 25 per cent.
The CML said the tight lending criteria for first-time buyers meant such deposits "remain out of reach for all but the most affluent buyers, for example people returning to home ownership after a period of renting, divorcees, or those who get financial assistance from their family".
First-time buyers typically borrowed 2.95 times their income, down from three times in January; with the average first-time buyer loan at £95,000, down from £97,000 in January and £114,000 in February last year.
Michael Coogan, CML director general, said: "Recent mortgage approvals figures published by the Bank of England show some signs of improvement at the beginning of the borrowing process, although activity is at a very low level historically.
"We are not convinced that underlying trends have shifted sufficiently to change our forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year."
For those able to get a mortgage affordability was easier, with interest payments for the average first-time buyer costing 15.4 per cent of their average income, compared with 20.1 per cent in February 2008; the lowest proportion since June 2004.
The CML figures also showed there was a shift away from tracker mortgages towards fixed-rates, with 56 per cent of new loans at fixed-rate, up from 49 per cent in January.
Mr Coogan added: "Some large banks are making more funding available through enhanced lending commitments, which is helpful but will not satisfy consumer borrowing demand on its own.
"We need further market measures to be introduced by the government around the Budget to encourage a mortgage market where all types of lenders - banks, building societies and specialist lenders, and large and small businesses - are encouraged, and enabled, to commit more funds to the mortgage market if we are to enhance lending activity significantly."
The CML also found how fewer homebuyers were paying stamp duty, as a result of falling house prices and the temporary raising of the nil-rate threshold.
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