Repayment boost despite lending slump

Some 93% of first time buyers chose repayment mortgages in October, the highest proportion since records began in 1974, marking a shift from the pre-2007 norm of three in 10 first time buyers choosing interest-only mortgages.

Gross lending in October was 12% lower this year than last with 46,000 loans for house purchase made worth £6.7 billion, down 4% in number and 6% in value from the month before.

Remortgaging did worse, falling 11% from September and 24% from October 2009 in value to 26,000 loans worth £3.1 billion.

First time buyers were hit hard too with just 17,000 loans worth £2 billion made in October, a decrease of 5% by volume and 9% by value from September, and 19% by volume and 17% by value on a year ago.

Home movers were advanced 29,400 loans worth £4.7 billion, representing a 3% drop by volume, 6% by value from September and a 14% reduction by volume and 10% by value compared to October 2009.

The CML said loan to values eased during the month however with first-time buyers borrowing an average of 80% of the property's value in October, up from 76% in September.

But it added that the average income multiple to a first-time buyer declined to 3.19 from 3.26 in September which it explained was partly due to the recent fall in house prices leading to lower loan amounts being advanced for house purchase.

The average loan-to-value for movers was 69%, up from 67% in September, while the average income multiple was 2.84, down from 2.89 in September.

Michael Coogan, director general of the CML, said: “With 2009 lending levels artificially inflated by the end of the stamp duty holiday, we expected to see a decline in lending year-on-year, so today’s figures are not surprising.

“Consumer confidence has also been affected by October's spending review, despite the relative affordability of monthly mortgage payments, and so a stable but small lending market will continue for some time to come."