Income multiples again declined modestly, reinforcing the trend that began in early autumn. First-time buyers typically borrowed 3.33 times their income, a figure that has fallen each month from a peak of 3.39 in August. Home movers typically borrowed 3.02 times their income, a figure which has remained steady since a peak of 3.04 in August.
The proportion of borrowers taking out fixed-rate mortgages fell for the fifth successive month to 65%, from 68% in October and a peak of 77% in June, as borrowers continued to anticipate future base rate falls. In the coming months, this trend away from fixed rates is likely to continue with the expectation of further rate reductions in early 2008.
Gross lending totalled £30 billion in November, down 10.4% from £33.5 billion in October, and 9.6% from £33.2 billion in November 2006. Lending for house purchase totalled 80,000 transactions, a 3.1% decrease from 83,000 in October. Remortgaging volumes declined more significantly to 73,000, a 21% drop from 93,000 in October. It is possible that more borrowers are staying with their existing lender at the end of fixed rate loans because of the deals on offer, the less attractive loans available elsewhere taking into account the costs of remortgaging, or because they are anticipating further rate reductions and are waiting before making a decision on whether to remortgage.
CML director general Michael Coogan commented: “At a time of global market uncertainty, business levels in the mortgage market are holding up reasonably well in the UK despite funding constraints. There are mixed signals on inflationary pressures here which will make the MPC’s decision finely balanced, but consumer confidence would be further underpinned by another rate cut this week.
“Most borrowers are on fixed rates and so will not see any immediate benefit from another change in the base rate. Some are on tracker rates which will automatically follow changes in the base rate or LIBOR (both up and down). A minority of customers are on a ‘standard variable rate’. Each lender will make its own commercial decision on whether to change its SVR to follow a base rate move, depending on its risk profile, cost of funds, and business focus.
“As the ‘credit crunch’ has affected businesses in different ways, this fragmentation of approach by different lenders should be expected until the market returns to more normal conditions later this year.”
