Latest UK property lending figures show first time buyers share of market is at lowest for three yea

 
Demand for mortgages in July continued to be weak in what is traditionally a strong month, according to the latest figures from the Council of Mortgage Lenders.
 
There were 56,000 loans for house purchase worth £8.4 billion advanced in July, up from 52,000, worth £7.7 billion, in June, and from 53,000, worth £7.3 billion, a year ago but these volumes are still exceptionally weak.
 
More worryingly loans to first time buyers declined. First time buyers are regarded as being an essential part of a property market recovery. Yet loans to this group fell to 19,400 worth £2.4 billion in July, down from 19,700, also worth £2.4 billion, in June and from 20,100 worth £2.3 billion in July 2009.
 
The first time buyers’ share of the market was at 34% in July, down from 38% in June. This is the lowest proportion since before the credit crunch began in August 2007.
 
‘Lending criteria remains tight, underpinned by caution on the part of both borrowers and lenders in the light of continuing economic uncertainty,’ said CML economist Paul Samter.
 
The lack of lending to first time buyers is a problem, according to Clare Francis of moneysupermarket.com. ‘The first time buyers’ share of the mortgage market has fallen to its lowest level for three years. This could present serious problems for the housing market and increases the risk of a prolonged downturn because first time buyers are essential to keep it moving. If no one is getting on at the bottom, the market grinds to a halt,’ she said.
 
‘Even though there are more mortgages available to those with smaller deposits, many people are struggling to get them because of the strict underwriting criteria being used by banks and building societies, who remain nervous about who they'll lend to. What’s more the rates on 90% mortgage deals are still significantly higher than those on the leading rates but these are only are only available to those with significant deposits, typically 40%,’ she explained.
 
‘The other factor which mustn’t be overlooked is consumer confidence. There is a lot of talk about a double dip in the housing market and this is likely to be having an impact on nervous first time buyers. Many will be reluctant to take the plunge now if prices could fall back again. Instead, they’ll be choosing to bide their time until confidence builds again, or prices do fall when they’ll be able to get onto the ladder at a lower level,’ she added.
 
Ray Boulger of leading independent mortgage adviser John Charcol said he does not expect a sudden improvement. ‘Current indications are that activity is unlikely to change much over the next few months,’ he said.
 
‘Borrowers are concerned over the risk of a further drop in house prices and the potential for negative equity. They may also be worried about the impact of government spending cuts on their own personal circumstances and wary of making a long-term financial commitment. Lenders have the same concerns and are simply not making finance available at attractive conditions,’ said Eric Stoclet, managing director of Crown Mortgage Management.
 
David Brown, commercial director of LSL Property Services, said that for those who have managed to secure mortgages, monthly payments are cheap and getting cheaper. But many have been using the extra disposable cash each month to increase their monthly commitments, and may find themselves in financial difficulties when interest rates and monthly payments rise.