First-time buyers still struggling and sharp fall in fixed-rate borrowing

They accounted for just 26% of house purchase loans in November.

The proportion of fixed-rate lending also fell sharply for the third consecutive month, accounting for just 28% of lending in November compared with 34% in October and a peak of 47% in August. This reflects the fact that the average new fixed rate became higher than the average new variable rate in November for the first time since February. It strongly bears out Professor David Miles' observations in his recent interim report about how sensitive consumers are to the initial upfront costs of a mortgage.

Gross mortgage lending in November totalled £24.6 billion - down from £27.4 billion in October but still 20% higher than last November's £20.5 billion. The breakdown between house purchase lending and remortgaging remained more or less steady at 48% and 43% respectively.

Average income multiples for both first-time buyers and movers remained virtually the same in November as for the past few months. First-time buyers borrowed an average 2.92 times their income, while movers borrowed an average 2.8 times. First-time buyers borrowed an average of 87% of the value of their property (down a little from the 90% of recent months), while movers borrowed an average 70%.

Commenting on the latest figures, CML Director General Michael Coogan said:

"After an exceptionally strong October, lending fell back a little in November partly due to seasonal factors. Looking ahead to next year, we expect house price inflation to reduce, but the market looks set to remain active despite higher interest rates. 2004 will bring other challenges in the housing market - not least the conundrum of how to address the affordability problems faced by first-time buyers.

"With the final reports and recommendations of the Government's two housing market reviews due in April, it may be a year of policy change. It will certainly be a year of massive regulatory change for the mortgage industry. While this may seem irrelevant for individual home-owners, the reality is that the changes impose costs which they will ultimately bear. It is crucial that Government tests any proposed policy changes to gauge whether they increase costs for consumers and, if so, whether they provide a corresponding benefit to them."