There were 516,000 house purchase loans in 2008, a decline of 49% from 2007 and the lowest level of activity since 1974. There were 32,000 house purchase loans in December, a decline of 5% from November and the lowest level since monthly records began in 2002.
Remortgaging declined by 26% from November to 40,000 loans in December, as the combination of attractive reversion rates and more restrictive lending criteria meant that for many borrowers the best option was to stay with existing deals.
The tightening in credit criteria, falling house prices, and the weakening economy have restricted the number of first-time buyers entering the market. In December, there were 12,100 loans to first-time buyers worth £1.4 billion, the lowest levels since monthly records began in 2002.
First-time buyers typically had a deposit of 22% in December, the highest proportion in 34 years of available data. The average first-time buyer borrowed 3.1 times their income and spent 17.1% of their income on interest payments.
There were 20,000 loans to home movers in December, worth £3 billion. Home movers typically borrowed 70% of the property’s value and 2.75 times their income. Interest payments typically consumed 13.2% of home movers’ income in December compared with 17.9% a year earlier.
Tracker mortgage products increased in popularity in 2008 as official rates declined, accounting for 29% of new loans, compared with 16% in 2007. However, the majority of borrowers continued to prioritise certainty over monthly payments, as 58% of new loans were fixed-rate mortgages, albeit down from 73% in 2007.
Over half of all home buyers (74% of first-time buyers and 44% of home movers) did not pay stamp duty in December. Without the temporary increase of the nil-rate threshold last August, only 40% of first-time buyers and 18% of home movers would have been exempt.
Michael Coogan, CML director general, said: "The shortage of mortgage funding and reduction in the number of active lenders has reshaped the mortgage landscape in the space of a year. This low level of transactions is insufficient for the functioning of an efficient market.
"Measures are now in place to seek to restore the flow of funding to the mortgage market, but this will take time to feed through. Further action may still be necessary to increase transactions, stabilise prices and restore confidence."
Peter Bolton King, Chief Executive of NAEA (NFOPP) commented: “NAEA figures show that there is a huge demand for property from first time buyers, who are increasingly visiting estate agents, registering their interest and searching for property. These figures demonstrate that they are being frustrated at the final hurdle because lenders are not making mortgages available.
“First time buyers are crucial, not only to the housing market, but the entire economy. More must be done to help them.”
