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    Remortgaging
     
    The housing market will never again see the record lending and borrowing that led to the credit crisis, lenders said, as figures published by the Council of Mortgage Lenders show remortgaging dropped to its lowest proportion of total lending in more than a decade.

    Just 25,000 loans were approved for house purchase in August, down 13 per cent on the previous month and 19 per cent lower than a year earlier.

    Banks have tightened their lending criteria in recent months amid fears that higher unemployment will result in home owners defaulting on their loans.

    It means many home owners are unable to remortgage and are moving onto their lender’s standard variable rate at the end of their initial deal. In some cases, the SVR will be more attractive that remortgage rates.

    The Council of Mortgage Lenders said the low levels of remortgaging would result in a “quiet” housing market in the coming months.

    Michael Coogan, director general of the CML, said: “The problem of excess capital, that led to record lending and borrowing in 2007, has self corrected and will not return.”

    “August is a traditionally slow month for mortgage lending and it was no different this year. We expect a quiet market to continue for the foreseeable future. While we do not know what the impact of the comprehensive spending review will be on our sector, it will clearly contain austerity measures that will likely further dampen consumers’ appetite to borrow.

    “We would expect lending to slow more significantly, year on year, as we head towards the end of the year, and it is unlikely that the uncertain environment will encourage a tick up of mortgage activity in 2011.

    “With some uncertainty surrounding future house price trends, we would expect a muted market in the next few years.”

    Melanie Bien, of mortgage brokers Private Finance, said: “’Borrowers hoping that lending conditions return to the heady days of 2007 where deposits were not required and income didn’t need to be proven, are in for a disappointment. The market has changed, and is unlikely to return to what is now regarded in some instances as ‘reckless lending’. Borrowers now need bigger deposits and good credit histories before lenders will look at them, with many first-time buyers priced out of the market until they are well into their thirties.”

    The CML’s figures also showed a drop in the number of mortgages approved for new buyers to 51,600 in August, 8 per cent lower than the previous month, but 3 per cent higher than a year earlier.

    Jonathan Moore, director of easyroommate.co.uk, said: “The drop in the number of house purchase loans is more than just a seasonal drop-off. The lending market remains in ill-health, and first-time buyers are bearing the brunt of lenders’ caution.”

    BBC Online 12.10.2010