There were 39,900 house purchase loans in October, worth £5.5bn, according to new data from the Council of Mortgage Lenders CML).

This was an increase of +14% in volume and +10% in value from September, but an annual decline of -52% in volume and -57% in value. The rise in house purchase lending was evenly spread across first-time buyers and home movers. There were 15,400 loans to first-time buyers and 24,500 home mover loans in October, up +15% and +14% respectively from September.

There were 70,000 remortgage loans worth £9.4bn, an increase of +12% in volume and +11% in value from September and a decline of -31% in volume and -28% in value from October 2007. Gross lending rose slightly to £18.6bn, up +6% from September but -44% lower than October last year.

The average loan-to-value and income multiple continued to contract for all homebuyers as a result of falling house prices and tightened lending criteria. First-time buyers typically borrowed 83% of the property’s value and 3.10 times their income, down from 84% and 3.18 in September. Home movers typically borrowed 68% of the property’s value and 2.73 times their income, down from 71% and 2.73 in September.

Michael Coogan, CML director general, said: “To different degrees lenders are facing conflicting pressures to recapitalise against possible future losses, service Government’s preference shareholdings at 12%, pay a premium to access the Bank of England Special Liquidity Scheme, show forbearance to borrowers in arrears, follow base rate moves down to help their existing borrowers, keep savings rates high to support existing savers, and provide competitive rates to new borrowers and savers to maintain economic activity in a recession.

“And they are supposed to ensure their long term financial stability to help the UK economy rebuild itself when we are out of the recession. Current policy objectives are conflicting and incoherent. The Government needs to decide on its key priority. The tug of war with lenders being pulled in every direction at once needs to end.
“We believe the government urgently needs to review the cumulative effect of the approach it has taken in the recapitalisation process on large lenders’ willingness and capacity to lend. Ultimately, the response of each lender – whether on commitments to follow base rate moves or to finance new business in the future - will depend on its access to, and the price of, its funding.“