Mortgages now more affordable
In particular, home movers are experiencing a low debt burden by historical standards. They typically needed only 10.6% of gross income in November 2009 to cover mortgage interest payments, down from 11.1% in October. Other than a brief low of 10.2% in the middle of 1996, this is the lowest debt burden on home movers since the CML started recording this data in 1974.
The debt burden on first time buyers also reduced, with 14.4% of gross income needed in November, down from 15.1% in October – the lowest it has been since May 2004.
Lending volumes experienced a seasonal dip in November. Even so, although the 53,000 house purchase loans represented a 4% decline on October, the number was an emphatic 66% increase on November 2008. On the other hand, the 31,000 loans for remortgage fell 6% from October with a drop of 39% year on year, showing a continuation of the “two speed” market for house purchase and remortgaging.
Loans for house purchase in November accounted for 60% of total new lending, the highest proportion since 2001. While the share of house purchase activity has grown considerably from the record low of 27% seen at the start of 2009, low interest rates and tight lending criteria have meant that remortgage demand has gone in the opposite direction. From January 2009, the percentage of loans for remortgage has dropped from 53% to 31% in November.
Commenting on the data, CML director general Michael Coogan said: “It is encouraging to see that mortgage interest payments are so affordable for home movers and first-time buyers. But with substantial deposits still needed to secure a mortgage, the market will continue to be relatively restrained for some time to come.
“With refinancing still unattractive or unnecessary for many borrowers due to continuing low rates, we are now seeing a much more house purchase-focused market, a profile much more like the beginning of the Noughties than its latter years.”