Page last updated at 11:19 GMT, Monday, 12 October 2009 12:19 UK

Mortgage lending dips in August

Woman walks past estate agent's window
Mortgage lending may have levelled off during the summer

The number of new mortgages granted for house purchase fell slightly in August to 53,000 from 56,000 in July, the Council of Mortgage Lenders (CML) says.

That total was still 29% higher than in August last year.

But the CML's figures indicate that sales may have reached a plateau, with first-time buyers still having to put down very large deposits.

The value of total mortgage lending, which includes remortgaging and buy-to-let deals, was down 36% on a year ago.

'Drawn-out recovery'

"House purchase activity has revived from its moribund state at the beginning of the year," said the CML's economist Paul Samter.

"It will be a drawn-out recovery process with seasonal ups and downs, but house purchase activity is now on a firmer footing."

The CML's figures show that in August the average first-time buyer still had to put down a 25% deposit to secure a home loan.

Two-thirds of all mortgage deals currently available stipulate a minimum 25% down-payment, regardless of whether the borrower is a first-time buyer or not.

Easing off?

Last month, the Bank of England said the number of new mortgages approved in August, but not yet lent, had fallen for the first time in eight months.

There were 52,317 approvals, down slightly from 52,404 in July, a strong indicator that lending may level off in the coming months.

While the CML's data shows that the number and value of of loans for house purchase are higher than a year ago, the value of all mortgage lending is still down, by more than a third, from August 2008.

Remortgaging, where home buyers stay put but change their mortgage deals, has fallen.

Very low standard variable rates have made it more attractive for borrowers to stay with their current lenders, rather than seek better fixed-rate deals elsewhere when their current ones expires.

Other types of mortgage, such as those for buy-to-let borrowers, are also down considerably on a year ago.

"At £12.3bn, gross mortgage lending - which encapsulates all mortgage lending activity including house purchase, remortgage, and buy-to-let lending - declined 36% from August 2008," said the CML.


House prices have been rising in the past few months, in an apparent recovery from the worst effects of the sudden slump which started with the onset of the credit crunch in the autumn of 2007.

Last week, the Halifax reported that prices rose by 2.8% in the three months to September compared with the previous three months, the first such quarterly increase for two years.

Meanwhile the Nationwide has said that prices have risen for five months in a row, and are now back to where they were in September last year.

Normally this would reflect a busy market with plenty of sellers and buyers.

Sales in fact doubled between their recent low point in January this year and August, when they fell back for the first time this year.

But many experts and commentators have said that the key factor in pushing prices higher has been a shortage of homes being put up for sale, and if more properties come onto the market soon then the recent rise in prices may stop quickly.

Annual house price change graph

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