August mortgage lending falls by 63%

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by Lin Freestone

According to figures released by the Council of Mortgage Lenders (CML), 42,200 people borrowed money to buy a property in August 2008. This was the lowest figure since the Council began collecting data in 2002.

The value of approved mortgages in August was £6bn, 63% lower than 12 months’ ago.

The director general at the CML anticipates that the government’s £37bn bail-out plan for British banks will help kick-start the market in the long-term, but that it will take time to feed through to the mortgage market.

In the month, approximately 15,600 mortgages were taken out by first-time buyers, who borrowed an average of £106,754. This was the lowest amount borrowed for house purchase since May 2006.

CML’s data shows that in August 2007, first-time buyers borrowed, on average, 3.39 times their income, and 90% of the value of the property. Since the credit crunch has brought in lending restrictions, these figures have fallen.

In August 2008, first-time buyers borrowed an average of 3.18 times their annual income, and 84% of the value of the property.

The 26,600 people who borrowed to move home, a fall of 61% when compared with August 2007, borrowed an average of £126,000, the smallest average advance since June 2006.

There were also 74,000 loans for re-mortgage worth £10bn, down 20% from August 2007. This is the lowest level of re-mortgaging volume and value since March this year.

The majority of borrowers opted for fixed rates for protection against any future increases in the Bank of England base rate. The proportion of people deciding on a tracker mortgage, which follows the rise and fall of the base rate, has increased from 28% to 31%.