There are further signs of a stabilisation in the mortgage market during May, according to the Council of Mortgage Lenders (CML). However, on an historic basis lending volumes are still quite weak.
May saw 41,500 loans worth £5.9 billion advanced to house purchasers in May, up from 40,800 in April, but the value of the loans has remained at £5.9 billion, indicating more loans at lower values. Despite this increase in house purchase activity the figures are still considerably lower than the same period last year (43,800 advances with a value of £6.3 billion).
Similarly Remortgage lending increased in May with 29,000 remortgage loans being advanced, valued at £3.6 billion, up from 24,700 advanced in April, worth £3 billion. The figures show that, whilst remortgage lending has increased in value by 9 percent, figures are still below the Mark peak of £4.1 billion.
Many borrowers have opted for fixed rate mortgages, 62 per cent during May, showing that most prefer the idea of a fixed mortgage payment in light of the uncertainty with future interest rates. On the other hand 22 per cent of all borrowers opted for a tracker mortgage. This shows a shift in consumer opinion since May last year, when tracker mortgages were taken out by 36 per cent of all borrowers and only 46 per cent opted for a fixed rate mortgage.
First time buyer lending remained fairly static with a slight increase from 15,800 advances in April to 15,900 in May and no change to the value of advances, £1.9 billion. When compared to May 2010 first time buyer lending has fallen by 2.5 per cent in volume, 16,300, and by 5 per cent in value, £2 billion.
Typically before 2008 around 30 per cent of first time buyers would take out an interest only mortgage but in May this year only 3 per cent of first time buyers opted for interest only.
CML Director General, Michael Coogan, commented:
"Over the coming months seasonal factors are likely to push up lending for house purchase. There is no evidence of any drastic changes on the horizon or any significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year.
Funding market conditions appear a little more positive, for example, recent securitisation deals suggest confidence has returned as investors regain their appetite to invest in bonds backed by mortgage assets. Overall this is a positive influence on mortgage market conditions."
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