The number of new mortgages and home sales in the UK grew slightly in May, according to the Council of Mortgage Lenders (CML).
Loans for home purchases and remortgaging both increased slightly. There were 41,500 loans for home purchases, an increase from 40,800 in April, though the total loan value for each month was similar at £5.9 billion. Despite the increase, however, the amount and levels are still below the previous years’ levels.
Remortgage lending also grew slightly in May, with 29,000 loans advanced, compared to 24,700 in April. When compared to May 2010, remortgage lending has grown by nine percent in value but is still below the March 2011 record.
The CML added that most new borrowers preferred fixed rate mortgages despite the continued low level of interest rates, due to uncertainty over the future of interest rates and to have the security of fixed payments amid rising inflation.
“The extreme caution of borrowers is highlighted by the popularity of fixed rate mortgages despite the fact that rates are unlikely to rise any-time soon,” said Chris Gardner, a mortgage expert from Obligo.co.uk.
“Many households are in a position such that they cannot even afford to gamble on rates. They have to play a conservative hand and opt for a fix.”
Lending to first-time buyers increased slightly to 15,900 from 15,800 borrowers in May.
Meanwhile, the amount of deposit that the average first-time buyer saved before borrowing has declined to approximately 20 percent from 25 percent in 2009 and early 2010. First-time buyers, however, still require a deposit that is, on average, double what was required before the 2007 financial crisis.
The popularity of interest-only home loans has dwindled from about 30 percent of loans to first-time buyers to only three percent.
“Over the coming months seasonal factors are likely to push up lending for house purchase. There is no evidence of any drastic changes on the horizon or any significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year,” said Michael Coogan, CML Director General.
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