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Mortgage market 'remains subdued' Mortgage market 'remains subdued'
(about 1 hour later)
The number of loans approved for house purchases in the UK in June fell to fewer than half the number of the same month a year ago, new figures show. The number of loans granted for house purchases in the UK in June fell to fewer than half the number made in the same month a year ago, figures show.
Some 47,000 home loans were approved compared with 98,000 in June 2007, and also down from 52,000 in May this year. Some 47,000 home loans were granted compared with 98,000 in June 2007, and also down from 52,000 in May this year.
The figures from the Council of Mortgage Lenders (CML) show that the mortgage squeeze, caused by the credit crunch, is continuing. The figures from the Council of Mortgage Lenders (CML) indicate that the mortgage squeeze, caused by the credit crunch, is continuing.
The CML added that the slowdown in mortgage lending was likely to go on.The CML added that the slowdown in mortgage lending was likely to go on.
"The majority of lending continues to be to people with larger deposits, which is prudent for borrowers and lenders in a slowing housing market," said CML head of research Bob Pannell."The majority of lending continues to be to people with larger deposits, which is prudent for borrowers and lenders in a slowing housing market," said CML head of research Bob Pannell.
DepositsDeposits
The figures show that the average homebuyer put down a deposit of 22% in June. These new borrowers had an average age of 35.The figures show that the average homebuyer put down a deposit of 22% in June. These new borrowers had an average age of 35.
Last month, and in June 2007, the average deposit was 20% showing that lenders are tending to favour safer borrowers. Mortgage lending activity remains relatively weak and will decline further Bob Pannell, CML class="" href="/1/hi/business/7553688.stm">Fixed-rate mortgages get cheaper
In May this year, and in June 2007, the average deposit was 20% showing that lenders are tending to favour safer borrowers.
This is the result of banks and building societies limiting the amount they offer in loans owing to funding shortages caused by the credit crunch.This is the result of banks and building societies limiting the amount they offer in loans owing to funding shortages caused by the credit crunch.
"Mortgage lending activity remains relatively weak and will decline further in the coming months as a result of funding constraints and lower consumer demand," said Mr Pannell."Mortgage lending activity remains relatively weak and will decline further in the coming months as a result of funding constraints and lower consumer demand," said Mr Pannell.
Wide effect
The effect of the squeeze has been felt across the board, with an 8% decline in the number of home loans to first-time buyers and a 9% fall in loans to home movers in June compared with May.
First-time buyers are having to find larger deposits for good deals
The average first-time buyer borrowed 3.33 times their income, with the average home mover borrowing 2.94 times their income.
With borrowers looking for certainty during a time of fluctuating mortgage rates, an increasing share of new home loans are fixed-rate mortgages.
Nearly seven in 10 new loans are fixed-rate deals and the CML believes this could increase because of the falling costs of these loans in recent weeks.
But the cost remains relatively high compared with before the credit crunch took effect, and so the number of homeowners remortgaging has fallen. Some 75,000 loans were granted for remortgaging in June, compared with 77,000 the previous month and 96,000 in June 2007.
With people looking for help in searching for a good deal in the uncertain market, there have been more mortgages obtained through an intermediary - such as a mortgage broker - in 2008 compared with previous years.
The proportion of home loans found through intermediaries in the April to June quarter was 78% for first-time buyers, 61% for home movers and 65% for people remortgaging.
These percentages were higher than the same quarter in 2007, but lower than in the first three months of 2008.