House purchase lending increases

According to the Council of Mortgage Lenders, the number of mortgages approved by lenders in February has increased by 4% from the previous month with the actual figure standing at 24,300. The historical average has been around 76,000 between 2002 and 2007.

The total value of all the loans approved was £3.1billion which is just over half the level of February the previous year. There was an increase of 7% on January for first-time buyers with 9,400 loan approvals.

Tight lending criteria still remains a barrier to most first-time buyers. First-time buyers typically had a deposit of 25% in February, a new record. Such amounts remain out of reach for all but the most affluent buyers, for example people returning to home ownership after a period of renting, divorcees, or those who get financial assistance from their family.

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.

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."