Mortgages for home purchases 'recovering'

The Council of Mortgage Lenders (CML) has said that mortgage borrowing on homes is making a recovery.

The number of home loans taken out between February and March rose by 25% to 45,000.

The CML also said that borrowing by first-time buyers recovered faster than that by existing home owners.

However, it warned of continued mortgage rationing that may go on for a number years unless the new government helps lenders raise finance.

The CML's director - general Michael Coogan, said: "Today's figures indicate there is currently some momentum to house purchase lending".

"But for the sake of the future health of the housing and mortgage markets, the new government will need to focus on the critical issue of funding and how to address the issues arising from the repayment of the emergency support provided during the financial crisis," he added.

"The UK is at risk of a chronic under-supply of credit - and the rationing of mortgages for customers - for years to come."

Figures showed that the amount of lending to all house buyers in the first 3 months of 2010 was still 35% less than in the last quarter of 2009.

But the CML said that this comparison should not be followed too closely.

"No trend can be inferred from this... given the distortion caused by the end of the stamp duty holiday in December," said Mr Coogan.

The CML argued that on a year by year basis, lending to home buyers has risen for the last nine consecutive months, while figures indicated an improvement for first-time buyers.

The average deposit first-timers had to put down stood at 24% of the purchase price for the second month in a row, slightly lower than the average 25% that was previously required since the start of 2009.

The number of loans made to first-time buyers rose by 27% between February and March, compared with a 24% increase for existing home owners.

"Only time will tell if this genuinely reflects a tentative sign of easing, but for the time being deposit constraints remain tight in all areas of lending," the CML said.

After house prices have continued to rise over the past year, lenders have begun to loosen up their lending criteria.

A recent report from financial information service Moneyfacts showed that the number of available mortgage deals was up by 36% at the start of May compared with levels at the start of the year.

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