Mortgage lending drops 57%, but rising proportion escape stamp duty

Mortgage lending in September was down 57 per cent on a year ago and down 15 per cent on August – despite an increase in the stamp duty threshold to stimulate growth.

Figures from the Council of Mortgage Lenders (CML) show 35,000 home buyer mortgages were issued.

Some 62,000 remortgage deals were made – a 15 per cent fall on August and down two-thirds on September 2007.

For buyers there was some good news as the number not paying stamp duty doubled – after the threshold was raised to £175,000.

Some 51 per cent of buyers avoided stamp duty, compared to 22 per cent last year.

CML director general, Michael Coogan, called on the government for further action to aid the property market.

"While house purchase activity has reached exceptionally low levels, it is encouraging to see transaction costs lowered for a larger proportion of borrowers," he said.

"The government should consider what other measures can be brought forward to enable the market to transact more easily."

He added: "Banks and building societies do want to support homeowners, but they have limited funds available and are, quite reasonably, taking a prudent approach to risk.

"If the pricing and volume of interbank lending continues to improve, this should help the flow of mortgage lending."

First-time buyers in September borrowed an average of £104,500, down from £108,000 in August and the peak of £119,250 in July 2007.

Income multiples of first-time buyers were down to 3.18.

However, as mortgage lenders tighten their lending criteria and offering much higher rates for high loan-to-value deals, first-time buyers are having to raise larger deposits.

The average first-time buyer had to put a deposit of 16 per cent.

In total only 13,400 first-time buyers entered the market in September, down from 28,200 in September 2007.

There were 21,500 loans to home movers worth £3.4 billion, a decline of 61 per cent in value from September 2007.

The typical home mover borrowed 71 per cent of the property's value and 2.82 times their income, compared with 72 per cent and 3.02 a year ago.