Remortgages hit eight year low as all loans drop off in January

According to data released today by the Council of Mortgage Lenders (CML), house purchase loans fell by more than three times the decline in remortgages in January, which highlighted the effect on the mortgage market from the end of the temporary stamp duty holiday in December.

There were 49 per cent fewer house purchase loans in January than in December 2009, but there were only 15 per cent fewer remortgage loans.

The 32,000 loans for house purchase, worth £4.7bn, which were issued over January were still notably up from the low of 23,000 - worth £3.1bn - seen in January 2009.

Conversely, the 24,000 loans for remortgage, worth £3bn, were down from 45,000 - £6.2bn - a year ago.

According to Michael Coogan, director general of the CML, this is the lowest monthly level of remortgage activity - both by number and value - in eight years of available data.

First-time buyers (FTBs) recorded the largest decrease among house purchasers, with a 54 per cent drop (55 per cent by value) between December and January.

Mr Coogan said this reflected the fact that a high proportion would usually fall into the £125,000-£175,000 property value category and rushed through their purchase to complete before the end of the stamp duty holiday in December.

The CML figures reveleaed that there were 11,300 first-time buyer loans, worth £1.3bn, over the month, down from 24,800 - £2.9bn in December 2009, but still up from 8,600 - £900m in January 2009.

After a 63 per cent increase in the number of first-time buyer transactions for properties in the £125,000-175,000 band in December, the number of equivalent transactions fell by 80 per cent in January, to account for just 19 per cent of all first-time buyer loans, down from a record 42 per cent in December.

Mr Coogan said: "It was a quiet start to the year. Lending volumes in January were low, but we had predicted this would happen due to the end of the stamp duty holiday distorting December's figures.

"When December and January data are taken together, they show little change in underlying market conditions compared with recent months, with activity still slow but well up on the lows of a year earlier.

"We expect lending over the coming months to remain weak as uncertainty over of the state of the economy and the upcoming election are likely to continue to hold back housing market activity."

Brian Murphy, head of lending at Mortgage Advice Bureau, added: "January's sharp drop-off in house purchases was inevitable given the stamp duty holiday that ended in December and so we're not considering this data to be a set-back.

"It was always on the cards given the sheer number of first time buyers who rushed to complete before the New Year, not to mention the Siberian weather we experienced in January.

"More important is that the mortgage market as a whole is trending upwards.

"There are more products, more products at higher LTVs and more competition on rate among the main players. February, for example, was our busiest month for nearly two years."