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| 'Sharp rise' in mortgage lending | 'Sharp rise' in mortgage lending |
| (41 minutes later) | |
| The number of loans handed out for house purchases in the UK rose sharply in March, lenders say. | The number of loans handed out for house purchases in the UK rose sharply in March, lenders say. |
| Some 31,000 mortgages were granted by lenders, up 29% on February but still 33% down compared with March 2008, the Council of Mortgage Lenders (CML) said. | Some 31,000 mortgages were granted by lenders, up 29% on February but still 33% down compared with March 2008, the Council of Mortgage Lenders (CML) said. |
| The increase was in line with data showing more applications for home loans had been approved by lenders. | The increase was in line with data showing more applications for home loans had been approved by lenders. |
| But the CML warned the position was still tough for those unable to put down a significant deposit. | But the CML warned the position was still tough for those unable to put down a significant deposit. |
| "Because the flow of lending is still constrained, there is a sharp dividing line in the housing and mortgage markets between those who can raise a substantial deposit and those who can't," said CML head of research Bob Pannell. | "Because the flow of lending is still constrained, there is a sharp dividing line in the housing and mortgage markets between those who can raise a substantial deposit and those who can't," said CML head of research Bob Pannell. |
| Indicators | Indicators |
| The nature of these figures mean that their publication lags behind many other indicators of the state of the mortgage market. | The nature of these figures mean that their publication lags behind many other indicators of the state of the mortgage market. |
| People borrowing now should be mindful of the years ahead when interest rates eventually rise, as they will Bob Pannell, CML class="" href="/1/hi/business/8047383.stm">Tougher rules to ban 'liars' loans' | |
| The March data echoed the upturn reported by the Bank of England, which said that the number of home loans approved - but not yet lent - in February and March was well above levels seen during the previous six months. | |
| HM Revenue and Customs also reported that completed property sales leapt by 40% between February and March. | HM Revenue and Customs also reported that completed property sales leapt by 40% between February and March. |
| But all of these levels remain much lower than a year ago, after lenders retreated from giving out high loan-to-value mortgages amid the global economic downturn. | |
| The CML said that mortgage lending remained "restrained" in March. | |
| 'Dividing line' | |
| The lenders' group said that the cost of paying the interest on a home loan was at its lowest level since 2004. | |
| As a result, some people have been tempted to buy their first home. Some 12,500 first-time buyers took out a mortgage during March. This accounted for 40% of all loans, the highest proportion since April 2005. | |
| The combination of low interest rates and lower house prices mean that their monthly interest payment now equates to 15.1% of their income, the lowest proportion since June 2004. | |
| TIPS FOR FIRST-TIME BUYERS Don't swap your bank account just before applying for a mortgageHave a credit card or two that you pay off every monthMake sure you are on the electoral rollBe prepared to stay in your new home for some years Source: Ray Boulger, mortgage expert Broken first rung of the housing ladder? | |
| But Mr Pannell stressed the significant divide between those first-time buyers who were able to put down a deposit and those who could not. | |
| The average first-time buyer had to put down a deposit of 25% of the value of a property in March, compared with 11% a year earlier. However, property values have dropped over that period. | |
| Typically, they were able to borrow three-times their salary in March, compared with 3.35 times a year earlier. | |
| "For those who can [raise a deposit], the burden of debt payments is low and mortgage interest is consuming proportionately less income than for a number of years. This is good news for now," said Mr Pannell. | |
| "Even so, a mortgage is a long-term commitment. People borrowing now should be mindful of the years ahead when interest rates eventually rise, as they will. | |
| "But for those without substantial deposits, entering the market is still both difficult and uncertain." | |
| Abbey, which is owned by Spanish banking group Santander, raised some hopes on Thursday when it reduced the deposit requirement on some of its most competitive two, three and five-year fixed-rate deals. However, this meant buyers still had to produce a 30%, rather than a 40%, deposit. | |
| Equity | |
| Mr Pannell said house prices were weak and lenders "conservative" about handing out loans because they were concentrating on rebuilding capital. | |
| The CML said 40,000 people remortgaged in March, which was 8% higher than in February and 45% lower than in March 2008. | |
| The body said remortgaging was expected to be muted in the coming months because homeowners coming off fixed-rate deals were reverting to cheap standard variable rates (SVR), and this was reducing the temptation to remortgage. | |
| Falling house prices also meant lower levels of equity and a reduction in remortgaging opportunities. | |
| There are 11.7 million mortgages in the UK, with loans worth over £1.1 trillion. |