House sales and new mortgages up slightly in May, says CML

The number of house sales and new mortgages increased slightly in May, according to the Council of Mortgage Lenders (CML).

Loans for house purchases and remortgaging both grew slightly. There were 41,500 loans for house purchases, up from 40,800 in April, though the total loan value for each month was the same at £5.9 billion. However, despite the increase the amount and levels are still below last years’ levels.

Remortgage lending also increased slightly in May with 29,000 loans advanced, compared to 24,700 in April. Compared to May last year remortgage lending has increased by nine per cent in value, but is still below the peak of March 2011.

Most new borrowers opted for fixed rate mortgages despite the continued low level of interest rates, perhaps because of uncertainty over the future of interest rates and to have the security of fixed payments in a time of rising inflation.

Chris Gardner, a mortgage expert from Obligo said: “The extreme caution of borrowers is highlighted by the popularity of fixed rate mortgages despite the fact that rates are unlikely to rise any-time soon.”

“Many households are in a position such that they cannot even afford to gamble on rates. They have to play a conservative hand and opt for a fix.”

Lending to first-time buyers increased slightly in May from April from 15,800 borrowers to 15,900, but compared to last year there has been a 2.5 per cent fall in the amount of first-time borrowers and a five per cent decrease in the amount borrowed, down from £2billion to £1.9 billion.

The amount of deposit that the average first-time buyer saved up before borrowing has reduced to around 20 per cent from 25 per cent in 2009 and early 2010. However, first-time buyers still require a deposit that is on average double what was required before the financial crisis in 2007. The popularity of interest-only mortgages has dwindled from around 30 per cent of loans to first-time buyers down to just three per cent.

Michael Coogan, CML director general said: “Over the coming months seasonal factors are likely to push up lending for house purchase. There is no evidence of any drastic changes on the horizon or any significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year.”

Source: My Finances

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