Mortgage costs hit second lowest level on record, says CML

Homebuyers were handed a welcome boost in November as the cost of servicing their mortgages fell to a 13-year low, according to new data.

The Council of Mortgage Lenders (CML) found that those moving property needed the lowest proportion of their income to cover mortgage interest payments since it dipped to 10.2 per cent in 1996, the lowest proportion since the CML started tracking the data in 1974. Movers needed only 10.6 per cent of their income to cover the payments in November, down from 11.1 per cent the previous month.

Michael Coogan, the director general of the CML, said: "It is encouraging to see that mortgage interest payments are so affordable for home movers and first-time buyers." However, he added that "with substantial deposits still needed to secure a mortgage, the market will continue to be relatively restrained for some time to come". This was confirmed by news that the number of mortgages approved slipped 5 per cent to 53,000 in November. The CML said the dip was "seasonal" before pointing out it was still an "emphatic" 67 per cent rise on November 2008.

The proportion of mortgages approved to buy new houses accounted for 60 per cent of new lending in November, the highest figure for nine years.

The body said that low interest rates and tight lending criteria had forced remortgage demand lower. The percentage of loans for remortgage slumped from 53 per cent in January to 31 per cent in November.

"With refinancing still unattractive or unnecessary for many borrowers due to continuing low rates, we are now seeing a much more house purchase-focussed market, a profile much more like the beginning of the Noughties than its latter years," Mr Coogan added.