The mortgage market is stuck in something of a rut and conditions are unlikely to thaw as we head into the winter.
There were 50,000 loans approved for house purchases in September, figures from the Council of Mortgage Lenders (CML) show.
Levels by volume were unchanged on August but down by £0.2 billion in value. Conversely, the number was down by 1,000 on September 2009, but the value of the mortgages was up by £0.3 billion. Loans for remortgage increased from 25,000 (worth £3.2 billion) in August to 29,000 (worth £3.6 billion) in September. Remortgaging accounted for 29% of total lending in September, the first proportionate increase since May.
Despite this rise, there is still little incentive for borrowers to move away from low reversion rates with interest rates remaining low. This, coupled with an inability for some borrowers to access new refinancing deals means there is little prospect of a significant rise in remortgaging in the coming months.
Loans to first-time buyers increased in number by 4% in September to 18,600 (worth £2.2 billion) but were 6% lower by volume and 4% lower by value than in September 2009. By contrast, the number of home-mover loans fell by 2% to 31,600 in September following a 10% fall in August. And the value also fell by 2%, from £5.3 billion to £5.2 billion.
Credit criteria remains tight and the slight easing of loan-to-value ratios that occurred earlier in the year appears to have reversed. First-time buyers borrowed on average 76% of the value of their property, down from 77% in August, while home movers borrowed 67%, unchanged from August.
"With lending volumes at historic lows, stability in the mortgage market is the name of the game at the moment," commented Michael Coogan, director general of the CML.
"With both consumer demand falling and funding capacity limited, neither supply nor demand look likely to feed through to any significant improvement in lending volumes as we had into winter."
In better news, the number of people suffering arrears and possessions fell. The CML said that a combination of low interest rates, a responsible approach by borrowers and lenders, and support from the Government and debt advisers has been helping to keep payment problems in check. Some 8,900 properties (representing 0.08% of mortgages) were taken into possession in the third quarter of 2010. The total was 5% lower than the 9,400 cases of possession in the preceding three months, and the fourth consecutive quarterly decline.
The number of properties taken into possession was 27% lower than the 12,200 in the same period a year ago. In the first nine months of the year, there have been 28,400 cases of possession, trending below the CML's revised forecast of 39,000 for the year as a whole - and significantly lower than the original forecast of 53,000 properties.
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