Remortgaging activity has slowed rapidly after holding up well in the face of falling house prices, according to the Council of Mortgage Lenders (CML).
The fall in remortgage activity was accompanied by a slight rise in loans for house purchase.
Overall, 71,000 remortgage loans were taken out in May, a 14% fall since April and 23% lower than May 2007. The value of remortgage business fell by a similar amount, down 13% to £9.6bn.
Loans for house purchase picked up slightly, rising 4% since April to 52,700, while total value reached £7.9bn, a 2% rise. However, both volume and value of house purchase loans are 44% lower than a year ago.
The CML report suggests fixed-rate popularity has increased, despite average fixed rates now being priced at over 7%, and accounted for 66% of all new loans, up from 59% in April.
Michael Coogan, director of the CML, comments: “The growing popularity of fixed-rate mortgages, despite the relatively high rates, suggests that many borrowers are prioritising certainty in their monthly payments.
“Lending levels continue to be lower than last year and any recovery is still some way away, with little sign of the special liquidity scheme increasing the flow of funds to the industry or lowering the cost of funds as hoped.”
The figures are the latest in a string of reports, which suggest mortgage finance in the UK is drying up as lenders become worried about bad debts and rapidly falling house prices.
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