According to the Council of Mortgage Lenders (CML) there were 24,300 house purchase loans worth £3.1 billion, completed in the month compared with 23,400 loans worth £3.1 billion in January - a 4% increase.
Remortgaging declined steeply in the month with 35,000 remortgage loans, down from 44,000 in January - a 20% decline. The CML expects demand for remortgaging to remain muted as lenders' standard variable rates are attractive compared to new mortgage pricing, and house price falls continue to erode equity levels which will exclude some borrowers from the best remortgaging deals available to those with large deposits.
There were 9,400 loans to first-time buyers - a 7% monthly increase - but significantly less than the 17,400 in February 2008. The tight lending criteria remain a barrier to most first-time buyers, according to the CML; first-time buyers typically had a deposit of 25% in February, a new record. First-time buyers typically borrowed 2.95 times their income, down from three times in January. The average first-time buyer loan was £95,000, down from £97,000 in January and £114,000 in February last year. This decline reflects the change in house prices over the same period and the growth in the size of first-time buyer deposits.
There was a shift away from tracker products towards fixed rates, with 56% of new loans at fixed-rate, up from 49% in January, while 31% were tracker products, down from 38% in January.
An increased proportion of homebuyers are not paying stamp duty as a result of falling house prices and the temporary raising of the nil-rate threshold. In February 57% of all house purchase loans did not incur stamp duty, compared with 48% a year earlier.
Commenting, Michael Coogan, CML director general, said: "These figures represent February mortgage completions. Recent mortgage approvals figures published by the Bank of England show some signs of improvement at the beginning of the borrowing process, although activity is at a very low level historically. We are not convinced that underlying trends have shifted sufficiently to change our forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year.
"Some large banks are making more funding available through enhanced lending commitments, which is helpful but will not satisfy consumer borrowing demand on its own. We need further market measures to be introduced by the government around the Budget to encourage a mortgage market where all types of lenders – banks, building societies and specialist lenders, and large and small businesses – are encouraged, and enabled, to commit more funds to the mortgage market if we are to enhance lending activity significantly."