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Home lending still down compared to a year ago

The Council of Mortgage Lenders (CML) has released figures which show that although there has been an improvement over the April figures, mortgage lending in May is still less than it was a year ago. Again although better than in April, for first time buyers there has been a decline in lending when compared to May last year; similarly re-mortgage has also declined not only on last year, but also on the previous month as well. One sector that is showing consistent improvement is the buy to let which is reflected in the higher buy to let house purchase lending activity.

There is hope from the CML who believe that the increased activity in May seems to suggest that the housing market is finally waking up after a disappointing first quarter. Although figures clearly show that mortgage activity is down on last year, there is hope that during the coming summer months, coupled with interest rates that remain historically low, with a competitive lending market, this all points to conditions that are very favourable for getting a mortgage. What must not be forgotten though is that affordability constraints and high asking prices for homes will work against any peak in the mortgage market.

The first time buyers have seen a slight increase in loans, but as pointed out by Patrick Bamford, director of mortgage insurance Europe for Genworth, average deposits have risen due to the new affordability requirements, which puts those without a sizable amount of deposit at a distinct disadvantage. For those who cannot fall back on the bank of mum and dad, saving more than 5% is a big ask especially with house prices at the moment, for those in the London and south east it is virtually impossible.

What many are calling for is a government backed permanent system of private mortgage insurance to accompany its planning reforms. Affordable mortgages are a must for first time buyers and these have to be permanently available if these buyers are to hope to get onto the housing ladder. What the CML has said is that their figures clearly show that competitive mortgage rates mean first time buyers are paying a record low proportion of their monthly income to service the capital and interest rate payments of their mortgage.

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