Mortgage advances fall

The number of mortgages advanced to borrowers fell by 4% in November 2009.

According to the latest data from the Council of Mortgage Lenders (CML) there was a 2% decrease in the number of loans given out to first-time buyers in November, falling to 19,300, and a 5% dip for homemovers to 33,600.

The CML insisted that the fall was seasonal, as there is usually a downturn in mortgage business in the run-up to Christmas, and it pointed out that the figures for November 2009 were far more healthy than those for November 2008 – in fact there were 66% more mortgages advanced.

The annual improvement was echoed by Barratt Developments, which reported that the value of its properties rose by 4% in the second half of last year.

But despite the substantial annual recovery in mortgage business, some experts said that the CML figures highlighted that lending to first-time buyers remained weak.

Mark Clare, chief executive of Barratt, said:

“For us, this is still all about mortgage availability and for first-time buyers, this has not changed. There is more product but it is still at very low loan to values (LTVs). Without higher LTVs, we will not be able to get the market going.”

A year ago the average first-time buyer put down a deposit of 17%. Today that figure has increased to 25% as lenders are insisting on larger deposits.

The CML pointed out that homeownership is at its most affordable level for five years for those who do have a big enough deposit to borrow.

The proportion of income needed to pay the average mortgage is now 10.6% for movers and 14.4% for first-time buyers.

"It is encouraging to see that mortgage interest payments are so affordable for home movers and first-time buyers," said the CML's director general Michael Coogan.

"But with substantial deposits still needed to secure a mortgage, the market will continue to be relatively restrained for some time to come," he warned.