Lending for purchases plummets whilst re-mortgages stay resilient.

Mortgage lending for house purchase has dropped almost 50% in March this year compared to the same month last year.

Data from the Council of Mortgage Lenders released this morning shows the number of loans for house purchase dropped 48% to 46,500 in March this year from 89,000 in March 2007.

It was also down 1% from 47,200 in February, but the CML says remortgaging levels held up well in the face of funding constraints.

Today’s figures relate to March mortgage completions.

The CML says the continued decline in lending for house purchase is partly due to the shortage of funding in the mortgage market as a result of credit market conditions.

Gross mortgage lending was £75bn in Q1, down from £83.9bn in Q1 2007.

The number of loans to first-time buyers declined in March to 17,800, down 1% from 17,900 in February and 45% from 32,500 in March last year.

Loans to home movers declined to 28,700, down 2% from 29,300 in February and 49% from 56,300 in March 2007.

Remortgaging activity has remained relatively resilient, increasing during Q1 2008 to £33.3bn which accounted for 44% of gross lending, up from 35% in Q1 2007 and the highest share in three years.

This is likely to be driven by the large numbers of borrowers exiting short-term fixed rate mortgages.

The proportion of other lending, which is predominantly made up of buy-to-let loans and further advances, increased in March to £7.2bn, accounting for 30% of gross lending and up from £6.3bn in February and £7bn in March 2007.

The average first-time buyer borrowed 89% of the property’s value and 3.35 times their income in Q1 2008.

Michael Coogan, director-general of the CML, says: “House purchase transaction volumes will continue to deteriorate in the coming months as recent approvals data from the BoE has shown.

“Since the introduction of the Special Liquidity Scheme, there has been a slight improvement in credit market conditions with LIBOR moving in a more helpful direction. But LIBOR still remains high relative to base rate and any improvement in credit market conditions will take time to feed through into the mortgage market.”