Mortgage lending decline for October

Mortgage lending decline for October

The Council of Mortgage Lenders (CML) have released data showing that an expected decline in mortgage lending has become apparent.
With 46,000.00 loans for house purchases in October (worth a reported £6.7 billion), down by 6% in value from September’s figures, the total value is 12% lower than October 2009. Figures in the final quarter of 2009 were, however, boosted by buyers bringing forward their transactions to take full advantage of the stamp duty holiday.
Remortgages show a similar pattern, with 26,000 loans (worth £3.1 billion) advanced in October, down 11% from September and 24% from October 2009.
There was also a decrease in loans to first time buyers in October, down 9% from September and 17% lower than October 2009.
LTV ratios appear to have eased in October with first time buyers borrowing an average of 80% of the property’s value, up from 76% in September. The average income multiple available to a first time buyer also declined from 3.26 in September to 3.19. 
David Brown, commercial director of LSL Property Services comments:
“Mortgage lending remains in the doldrums as lenders continue to prioritise their balance sheets over new lending. The good news for those who have actually secured a mortgage is that the cost of monthly repayments is dropping. The average first-time buyer pays just 13.3% of their monthly income on interest payments — a drop from September. But borrowers should not become dependent on unsustainably cheap mortgage payments to get by each month. Interest rates remain at an historic low, which is keeping monthly payments down artificially. While this is likely to continue well into 2011, interest rates cannot stay low forever. And when they do rise, the cost of repayments will head north. In an ideal world, borrowers would have been using the low rates to pay off more of their mortgage. However, thousands have become accustomed to more disposable cash each month, and have enjoyed a more expensive lifestyle instead. If these borrowers are caught unawares, rather than remortgaging onto affordable fixed-rate deals – or getting their household finances in order, we may well face the prospect of surging arrears when interest rates eventually rise.” 
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