FARUKI

Mortgage lending showed a slight rebound in April, according to the Council of Mortgage Lenders (CML).

Some 50,700 loans to purchase homes were granted in April, a rise of 5,000 from the previous month and the highest level since December.

But the number was still 36% down compared with the same month in 2007 because of the credit crunch.

An average first-time buyer put down a deposit of 13% of a property’s value and borrowed 3.3 times their income.

Michael Coogan, CML director general, said that the low levels of lending were set to continue.

“Monthly house purchase lending volumes continue to be lower than last year’s levels and there will be a further weakening in coming months as recent approvals data has shown,” he said.

Mortgage squeeze

The credit crunch has caused the banks to cut back on lending, especially to those they consider to be more of a risk.

The Bank of England made extra funds available recently to encourage banks to lend to each other.

But Mr Coogan said: “The squeeze on mortgage funding has led many lenders to tighten their lending criteria.

“While tighter criteria make it more difficult for some borrowers to obtain a mortgage, they also reduce risk in a slower housing market.”

First-time buyers have felt the effects more than most, and the CML figures show that such borrowers have been asked to put down bigger deposits in recent years.

The CML data shows that the 13% deposit of a property’s value put down by the average first-time buyer is the largest for more than three years.

This trend has been reinforced by the UK’s largest lender, the Halifax, which will increase the interest rate on its new three-year fixed-rate deal for customers who want to borrow between 75% and 90% of a property’s value from 13 June.

However, customers who need to borrow less than 75% by putting down a bigger deposit are being offered cheaper deals on tracker and fixed-rate mortgages.

The number of loans granted to first-time buyers did rise slightly in April compared with March, up 4% to 18,500, but this was still 36% lower than a year ago, the CML said.

Read full story @ BBC UK