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January slump in mortgage borrowing

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26/02/2015
Mortgage borrowing in January fell 11% year-on-year as the market continues to level off following a strong 2014.

Figures from the British Bankers’ Association said high street lenders completed loans worth £9.8bn in January, 11% down on the same month last year.

Approvals were also on the wane with the number of people accepted for a mortgage down marginally compared to December and 21% lower than a year ago.

Remortgage and other approvals were the worst hit by this downturn with agreements 21% and 25% lower than in January 2014 respectively.

However, the overall stock of mortgages grew slightly year-on-year, rising by 1.4%.

Richard Woolhouse, chief economist at the BBA, said: “The housing market appears to be bottoming out with a slight increase in approvals for new purchases in the last month but this is still significantly down on the levels of activity we saw last year.”

Genworth’s Patrick Bamford said buyers face a number of hurdles if they are to meet their housing hopes this year.

“Aspirational first-time buyers and home movers face multiple challenges: high house prices relative to wages, strict mortgage lending criteria and a lack of housebuilding,” he said.

“Despite a wave of new high loan-to-value (LTV) products appearing on the market, first-time buyers still face financial pressures from every direction. Unless they have a large deposit, they are left paying a far greater premium for 95% LTV mortgages than before the recession.

Bamford also said there was scope for price reductions at higher LTV levels.

“While Help to Buy has certainly invigorated the product range for first-time buyers and provided a much needed boost to high LTV activity, greater lender appetite and competition needs to be encouraged to give buyers better rates,” he said.

“There is a huge amount of scope to expand on what Help to Buy has achieved and support a permanent return to a ‘normal’ market for first-time buyers. For all its merits, the current scheme is still nothing more than a temporary solution to a long term problem.”

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