New home loans up 4%

Updated 11.09 Tue Jul 08 2008

Keywords: mortgage, remortgage, sellers, buyers, Council of Mortgage Lenders

Lending for people buying a home rose slightly during May but the number of people remortgaging fell sharply.

Around 52,700 home loans were taken out by people buying a new property during the month, 4 per cent above April's figure, while the value of the mortgages rose for the third month in a row to £7.9 billion, the Council of Mortgage Lenders has said.

Around 52,700 home loans were taken out by people buying a new property during the month, 4 per cent above April's figure

But there was a sharp drop in the number of people remortgaging, with just 71,000 people switching to a new deal, 14 per cent less than in April and the lowest level since December last year.

The drop in the number of people remortgaging is likely to have been driven by the current problems in the mortgage market, with high mortgage rates and arrangement fees that often run into four figures leaving many people better off staying on their lender's standard variable rate when their current deals ends.

But despite the slight rise in the level of mortgages taken out for house purchase during the month, lending was still well down on figures for the same month of 2007.

Both the number and value of advances for house purchase were 44 per cent below figures for 12 months ago, while the number of loans for remortgaging were 23 per cent lower.

The CML warned that lending volumes looked set to fall further still in the months ahead, following recent bleak data from the Bank of England on mortgage approvals.

CML director general Michael Coogan said: "Lending levels continue to be lower than last year and any recovery is still some way away, with little sign of the special liquidity scheme increasing the flow of funds to the industry or lowering the cost of funds as hoped."