Which? uses cookies to improve our sites and by continuing you agree to our cookies policy

New mortgage loans fewest since records began

But slight increase in remortgages reported

The number of mortgages granted to people buying a home slumped to a new record low in January, new figures show.

Just 23,400 loans were taken out by people purchasing a property during the month – 28% fewer than in December and 52% down on January 2008, according to the Council of Mortgage Lenders (CML).

But there was a slight increase in the number of people remortgaging, with 44,000 loans advanced to people switching to a better deal.

Taking action might help you sell your house

Taking action might help you sell your house

That was 8% more than in December, but still half the level for January last year.

If you’re coming to the end of a deal, our interactive mortgage finder will guide you through what’s on the market to find one that may suit you more than your current mortgage.

Remortgages up but not buoyant

Despite the pick-up in remortgaging activity during January, the CML said it expected demand from people switching loans to remain weak this year.

Only 8,900 first-time buyer loans were taken out during the month, the lowest since the CML’s records began in 2002 and well down on a peak of 54,100 in June 2002.

Recent sharp interest rate cuts mean many borrowers are now best off staying on their lenders’ standard variable rate, the rate they usually revert to once their existing mortgage deal comes to an end.

Tighter lending criteria to blame

The group blamed the low level of first time buyer loans on a further tightening in lending criteria by banks and building societies in response to the worsening economy and falling house prices.

It said these tighter criteria were acting as a barrier to many people who wanted to buy a home. The typical first-time buyer put down a deposit of 24% during January, the highest level on record.

But there was better news for those who were able to get a mortgage, as lower interest rates reduced the amount of income first-time buyers spent on mortgage repayments to 15.8%, the lowest proportion since July 2004.

Fewer lenders

Overall, a total of £11.7 billion was advanced through mortgages during January, the lowest monthly figure since April 2001, although the CML said January and February were typically the quietest months for the mortgage market.

Michael Coogan, CML director general, said: ‘The current withdrawal of many specialist, small and foreign lenders from new lending has created a huge gap in the capacity to fund mortgages to match consumer demand and this is continuing in 2009.

‘People want to know why lenders are not lending. 

They are, but Government schemes to restore the flow of funds are primarily focused on a few large banks and recent lending commitments by a few lenders cannot fill the gap overnight, although we hope to see more funds flowing into mortgage activity later in the year.

No end in sight for falling market

Tracker mortgages increased in popularity during January, accounting for 38% of all loans during the month, as their average rate fell from 4.26% to 3.64% on the back of recent cuts to the Bank of England base rate.

But Howard Archer, chief UK and European economist at IHS Global Insight, said: ‘The CML data indicates that housing market activity remained very much on the back foot at the start of 2009.

‘We certainly expect house prices to continue to fall for some considerable time to come.

‘While latest survey evidence indicates that buyer inquiries are now picking up significantly as people are attracted by lower house prices and the Bank of England slashing interest rates, we are sceptical that this will lead to a marked up in actual sales any time soon.’

Get the latest money news

Which? Money Email

Subscribe to the Which? Money Email for independently reviewed Best Buys and impartial expert advice plus the latest money news and money saving tips.

For daily consumer news, subscribe to the Which? news RSS feed here. 

If you have an older web browser you may need to copy and paste this link into your newsreader: https://www.which.co.uk/feeds/reviews/news.xml . 

Find out more about RSS in the Which? guide to news feeds.

Back to top