LTVs at lowest level since early 1980s

The average first time buyer had a deposit of 15% in July, up from 13% in June, bringing the loan-to-value (LTV) ratio down to the lowest level since the early 1980s, according to the Council of Mortgage Lenders (CML).

First-time buyers typically borrowed 3.24 times their income, down from 3.33 in June and the lowest multiple since July 2006.

Tighter lending criteria contributed to a 50% fall in loans to first time buyers in July compared to July 2007 at 17,300, down 5% on June. The CML also attributed the decline to the wait-and-see approach taken by many first time buyers as house prices continue to fall.

Total gross lending rose 5% to £24.7bn in July from £23.6bn in June, but this is a decline of 28% from a year ago and the ninth consecutive monthly year-on-year decline.

Tracker rate mortgages have increased in popularity as borrowers anticipate the next Bank rate move to be down with 28% of borrowers taking out tracker products compared to 21% in June.

The figures revealed remortgaging rose and lending for house purchase held steady in July, by comparison with June.

There were 85,000 remortgage loans worth £11.9bn in July, up 14% in volume and 16% in value from June.

House purchase loans totalled 47,400 and were worth £7.1bn. This figure is unchanged from June but represents a 51% fall by volume and 54% by value from the same month last year.

There were 30,100 loans to home movers in July, up 3% from June but 53% lower than July last year. Home movers typically borrowed 68% of the value of the property, down from 72% in June, and 2.85 times their income, down from 2.94 in June.

The size of the average house purchase loan decreased in July to £120,170, from £125,000 in the previous four months.

Commenting on the figures, CML director general Michael Coogan says: “Tighter lending criteria have clearly made it more difficult for first-time buyers to enter the market. The stamp duty and shared equity measures announced by the government last week will be helpful to those first-time buyers looking to enter now, but many may be waiting for house prices to stabilise.

“Restoring the flow of funding to the mortgage market is crucial to helping the housing market recovery and we look forward to the findings of the Crosby Review at the end of the month.”