Fall in new lending seen as sign of a housing slowdown

The UK housing market could be "coming off the boil", according to the Council of Mortgage Lenders (CML), which has reported that the number of loans taken out to buy a home fell to 94,000 in July from 102,000 in June.

The amount of money borrowed by people buying a home was also down.

"The long-anticipated slowdown in the housing and mortgage markets may now be beginning to materialise," said Michael Coogan, director- general of the CML. "Both market conditions and sentiment are coming off the boil and affordability is ever more stretched."

But the CML did point out that a fall in lending between June and July has been evident in each of the past three years, due to a seasonal cooling in the property market as house-hunters go on holiday.

The CML also reported that more borrowers appear to be turning to fixed-rate mortgages, to protect themselves against further rises in UK interest rates.

This is despite the expectation of a growing number of City analysts that the bank base rate may well have peaked at its current 5.75 per cent.

In total, nearly eight out of 10 new home loans in July were fixed rate, the CML said.

Other figures from the council underline the struggle faced by first-time buyers as they try to clamber on to the property ladder. On average, first-timers now have to borrow 3.39 times their salary – a record high – compared with 3.37 times in June and 3.23 in July 2006.

They are also using up 19.7 per cent of their incomes to repay just the interest on their loans – the biggest proportion since 1991.

No wonder, therefore, that the number of home loans being taken out by first-time buyers fell by 7 per cent between June and July.