Banks: Mortgage measures on track


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Banks and building societies insisted efforts to unblock the mortgage market were on track despite a pause in lending momentum during January.

The Council of Mortgage Lenders (CML) reported that lending fell back by 9% month-on-month in January, with an estimated £10.4 billion of loans advanced last month, which was also down 3% on the same period a year ago.

Despite the slowdown, the CML said it still expects activity to lift in the coming months amid better mortgage availability and a raft of cheap deals on offer.

Separate research released by financial information website Moneyfacts found that a recent mortgage price war among lenders has pushed average fixed-rate two, three and five-year mortgage rates to their lowest in 24 years.

A typical two-year fixed rate deal across all loans-to-value is 4.11%, while a five-year fix has reached 4.14%. In 1989, a two-year fix would have had an average rate of 12.83% while five years was 12.85%.

Record low interest rates have made borrowing cheaper and lenders have scrambled to offer some of their "best ever" rates since the Government introduced a Funding for Lending scheme last August, which gives lenders access to cheap finance.

The CML reported earlier this month that the number of first-time buyers in the UK rose to its highest annual level in five years in 2012. It has also pointed to "encouraging" signs that people with small deposits are getting access to mortgage deals and previously said that around one in 40 first-time buyers is taking out a 95% mortgage, compared with less than one in 100 a year ago.

Meanwhile, more than 3,000 homes have been reserved under the Government's NewBuy scheme, which allows home movers and first-time buyers to purchase a property with a 5% deposit.

However, while the mortgage market has improved, households are still facing strong pressures on their finances from high living costs and stagnant wages, which are holding back their desire and ability to take on more debt.

CML market and data analyst Caroline Purdey said: "House purchase activity was robust into the start of 2013, on the back of better mortgage availability and pricing, and we share the Bank of England's confidence that this will continue over the coming months."

© 2013 Press Association