House purchase lending plummets 26%: CML

House purchase lending fell 26% in January to £4.2bn, as an “unusual combination of factors” drove buyers from the market, according to the CML.

The body found 28,500 house purchase loans were advanced in January, down 29% on December. By value the fall was 13%.

Compared to January 2010 the numbers are down 12%, a substantial fall given that the beginning of last year saw artificially low lending after the rush to buy before the stamp duty holiday ended in 2009.

The CML said the fall in lending was far greater than the expected seasonal decline between December and January.

It blamed a mixture of factors including household budgets coming under pressure from government cuts, rising inflation and tax measures, such as the increase in VAT.

The mortgage market was further depressed by December's severe weather and uncertainty over interest rate moves, which are likely to keep the market flat, it says.

By comparison to house purchase, the impact on remortgage activity was less dramatic. The number of remortgage loans advanced fell 7% by value to £2.7bn and 6% by number to 22,100, according to the CML.

This was 10% down by value and 5% down by number on the same period of last year.

CML figures suggest remortgaging increased its share of total lending from 27% in December to 28% in January.

Bank of England figures showing an increase in remortgage approvals in the last three months should feed through into higher CML remortgage completion figures during the next few months.

House purchase lending was split equally between first-time buyers and home movers. First-time buyers took 10,500 loans, worth £1.2bn, in January, down 28% by number and 29% by value on December.

Meanwhile, home mover loans fell 29% by number, from 25,400 to 18,000, and 28% by value from £4bn to £2.9bn month on month.

Nevertheless, the average first-time buyer LTV increased from 77% in December to 80% in January, while home movers stayed stable at 68%.

Michael Coogan, director general of the CML, says: "The market remains stable at low levels of transactions."