Number of mortgages taken out by homebuyers falls to record low

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by Kay Murchie

Figures released this week from the Council of Mortgage Lenders (CML) show that the number of mortgages taken out by homebuyers fell to 50,300 in January, half the rate of August last year and the lowest figure recorded since CML began collecting monthly information in 2002.

According to many lenders, the mortgage market is shrinking under the impact of the ongoing problems in the banking system.

The announcement follows that from the Royal Institution of Chartered Surveyors (Rics) who said surveyor gloom is near a record high. The number of UK surveyors reporting property price falls last month is close to the historic level of June 1990.

64% more surveyors reported a fall than a rise in house prices in February compared with 54.7% in January. Rics said cautious homebuyers has resulted in stockpiles to increase to levels not experienced for 10 years.

Furthermore, the latest monthly survey by the Halifax established that property prices are continuing to slow down. The lender said prices across the UK fell by 0.3% in February, taking the annual rate of inflation down from 4.5% to 4.2%.

Commenting on the figures released from the CML, Michael Coogan said the wholesale funding markets remain largely closed and mortgage funding still remains constrained.

This is now having a discernible impact on lending criteria and the ability of first-time buyers to get onto the property ladder, added Mr Coogan.

The dramatic decline reflects the fact that since the financial crisis that struck the banking system last summer, lenders have been finding it very difficult to raise funds from other financial institutions to offer as mortgages to their customers, continued Mr Coogan.

However, the amount of re-mortgages increased as homeowners come to the end of their fixed-rate deals.

Approximately 1.4 million people are due to end their fixed-deals this year. The CML said that many of these borrowers were switching from fixed rates to tracker rates. Some 57% of loans taken out in January were fixed-rate deals, down from 77% in June 2007.