Mortgage lending drops in August

13/10/2009

The number of new mortgages approved for house purchases fell by 3,000 from July to August to 53,000, the Council of Mortgage Lenders says.

It's still 29 per cent up from last year, but CML's figures may be a sign that sales are levelling off as first-time buyers struggle to put down huge deposits.

For August the CML found that the average first-time buyer deposit was 25 per cent to secure a home loan.

It's a stinging market even for non-first-time buyers as two-thirds of all mortgage deals currently demand a minimum 25 per cent deposit according to the CML.

Debt management firm EuroDebt says that for people struggling with finances and with money worries the prospect of re-mortgaging in the current climate is very poor.

We have already seen projections by rating agency Fitch that house prices may fall another 17% by the end of 2010.

Remortgaging is likely to be difficult as interest rates are likely to remain low in 2010 and there may be limited re-finance products on the market for homeowners with loan-to-value of over 70%, says EuroDebt. Plus interest rates could rise in 2011.

For those with an impaired credit file, the reality is likely to be that they cannot re-finance to solve debt problems'>debt problems. Non-borrowing solutions like Debt Management Plan'>Debt Management Plans and IVAs are likely to continue to rise, where people want a managed service to help them take control of their financial affairs.

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