Mortgage Numbers Fall

The number of mortgages taken out by homebuyers in the last quarter of 2007 were at their lowest for a year’s final quarter for 12 years. Just 225,200 mortgages were taken out in the period. Figures from the Council of Mortgage Lenders (CML) show that quarterly figures have dipped below that number since 1995, but this is the first time that it has happened in a quarter other than the first quarter – traditionally the slowest period.

The average number of mortgages taken out over a final quarter in the 12 years since 1995 has been 296,375, so last year’s figures was 24% lower than the average.

A spokesman for the CML said that lenders were facing the hardest times since the property crash of the 1990s, as funding problems from the credit crunch and a seasonal lull were hitting at the same time. The spokesman said: “What we have seen since around that time and since control of rates setting policy was handed to the Bank of England is a move to lower and more stable interest rates and more benign general economic conditions. This has contributed to very strong growth in house prices and mortgage lending for the best part of a decade. The factors now are potentially most challenging of anything we’ve had since the mid 1990s.”

The worst may be yet to come, however. As the first quarter is usually the quietest period, lenders may see the first quarter of 2008 go even lower.

The CML figures showed a drop of 35% to 62,100 in lending for house buying in December 2007 compared with the previous December (95,700). It was also the lowest monthly figures since January 2005.

Home purchase mortgages were down by 10% to one million, having fallen sharply from a peak in August of 103,000.

Lending values also fell in the year, by 2% to £155bn. Credit problems were largely blamed for the downturn.

CML Director general Michael Coogan said: ‘The decline in lending appears to be driven more by funding constraints than lower consumer demand.’

Fixed-rate mortgages were very popular with 73% taking them out in 2007. They peaked at 77% in July, as the base rate reached 5.75% and economists were forecasting that borrowing costs could soar above 6%. Then came the credit crunch, and by the end of the year, just 64% were opting for fixed-rate deals