Business

Mortgage lending jumped in June, lenders say

House keys
Image caption New loans have recovered slightly, but only to last autumn's levels

Mortgage lending jumped in June, albeit from a very low level, the Council of Mortgage Lenders (CML) has said.

The total number of new home loans to house buyers rose by 22% from May, to 46,700.

And those specifically to first-time buyers reached a 10-month high, up 24% from May to 18,100.

Although the level of lending was still significantly lower than a year ago, the CML said the latest figures were encouraging.

"Recent increases in Bank of England approvals figures also show that more completions are expected in July, so the more encouraging numbers may persist for a while," said Paul Smee, director-general of the CML.

The number of new mortgages arranged in June was back to the level recorded last October.

It was also 63% higher than in January this year, when newly arranged loans had been at their lowest monthly level for nearly two years.

Despite more first-time buyers coming on the scene, they still had to put down an average deposit of 20% of the value of the home they were buying.

The CML said although this was down from the high point of 25% recorded during 2009, it was still much higher than the "historic norm" of 10%.

Cheaper mortgages

Chris Gardner, of mortgage brokers Obligo, said the increased lending in June was due to lenders offering more loans to people with smaller deposits.

"There are now plenty of competitive 90% products in the market and we are also seeing more lenders move into higher LTVs (loan-to-value), which is driving rates down further," he said.

"In recent months, more lenders have even returned to the 95% LTV range, although these products are still in relatively limited supply," he added.

Potential buyers are also being helped by a fall in the interest being charged on new fixed-rate deals.

The financial information service Moneyfacts said the average five-year fixed-rate deal was now at 4.99% - and that this was the first time since 1988 that such offers had been below 5%.

Michelle Slade of Moneyfacts said: "The cost of funding fixed-rate mortgages through the [financial] markets has fallen to an all time low, and this is being passed on to borrowers through some of the lowest mortgage rates ever seen."

"Borrowers opting for the average five-year fixed mortgage today would be paying £117 per month less than someone who secured the deal in September 2009," she explained.

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