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Bleak outlook in short term as lending for purchases dips again

Lending for new home purchases fell again in March but remortgaging levels held up in the face of the credit crunch, according to figures from the Council of Mortgage Lenders.

The CML said the number of loans for purchases came to 46,500 in March, down 1 per cent from 47,200 in February and 48 per cent from 89,000 in March 2007. In addition, the number of home loans to first-time buyers declined in March to 17,800, against 17,900 in February and 32,500 in March last year.

But remortgaging has remained relatively resilient at £33.3bn in the first quarter of 2008, up 35 per cent on the fourth quarter of 2007 and driven by the large numbers of borrowers leaving short-term fixed-rate mortgages.

"Other lending" (buy-to-let loans and further advances) rose in March to £7.2bn – up from £6.3bn in February and £7bn in March 2007.

According to the CML's director-general, Michael Coogan, the squeeze on mortgage borrowing is not set to ease in the short term at least. "There has been a slight improvement in credit market conditions," he said. "But Libor [the rate at which banks lend to each other] still remains high relative to the Bank of England interest rate, and any improvement in conditions will take time to feed through to the mortgage market."