Council of Mortgage Lenders figures show that December 2006 saw £28.6 billion of mortgage lending - a new December record to follow on from the November 2006 figure of £33.2 billion, the highest month on record. This represents a 14% fall from November to December.
Rising house prices, however, have hit first-time buyers to such an extent that the ratio of their mortgage value (at an average of £115,499) to their income is now at a record level of 3.31. Recent interest rate increases have contributed to the situation where the average first-time buyer now spends 17.9% of their income on their mortgage interest payments. Added difficulty has come in the form of stamp duty with 59% of all first-time buyer mortgages now above the stamp duty threshold of £125,000.
During 2006, fixed-rate mortgage deals gained in popularity with approximately two-thirds of people buying or remortgaging choosing a fixed-rate deal. During 2005 fixed-rate deals represented just over half of the total mortgage market.
CML Director General Michael Coogan made the following comments:
"The monthly figures clearly show the cumulative effects of the gradual worsening in affordability for first-time buyers - and the ever-rising proportion of them who are caught by stamp duty. Although the mortgage market performed extremely well in 2006, the effect of rising interest rates and the continuing decline in affordability are likely to dampen activity somewhat in 2007."
