Mortgage lending continues to rise

Mortgage lending reached a new record during June, despite the fact that the number of first-time buyers entering the market fell to its lowest level yet, figures showed today.

The Council of Mortgage Lenders (CML) said a total of ?22.5bn was advanced during the month, up from the previous record of ?21.8bn set in May.

Nevertheless at the same time the number of people taking their first step on to the property ladder continued to decline, with just 30,000 first-time buyers entering the market in June.

The proportion of mortgage lending to first-time buyers dropped to 29% during the month, and has been steadily falling from 44% in June last year.

During the first six months of 2003, only 174,000 people bought their first home, compared with 253,000 during the first six months of 2002.

"Despite very affordable mortgage rates, high house prices are making it difficult for first-time buyers to enter the market," said CML director general Michael Coogan.

He went on to say that the shortage of first-time buyers was beginning to make it harder for sellers further up the chain to sell their properties. "This is one of the reasons why the CML expects the slowdown in momentum to continue, as lending discipline and affordability will constrain the potential for rapid house price growth," he declared.

The British Bankers' Association also reported a rise in mortgage lending by the major banks during June. The group said net lending, which strips out redemptions and repayments, was ?5.31bn during the month, after a moderate rise of ?4.62bn in May, while the Building Societies Association reported net lending of ?1.7bn, up from ?1.54bn the previous month.