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Mortgages taken out for house purchases fell by 10 per cent last year, according to figures released by the Council of Mortgage Lenders (CML) today.
The average mortgage rate rose from 5.35 per cent to 6.05 per cent across 2007, due to three interest rate rises and the increasing cost of inter-bank borrowing.
The number of home loans applications granted dropped every month after peaking in August, with a 22 per cent drop in mortgages being taken out in December last year.
“Affordability has been stretched further in 2007, but the recent base rate cuts and the expectation of future cuts will ease debt servicing burdens in 2008,” said CML director general Michael Coogan.
“The impact of payment shock on the large numbers of borrowers coming to the end of fixed-rate mortgages will also be less than we anticipated last year,” he added. “For first-time buyers, the combination of subdued house price inflation and lower mortgage rates means affordability should ease slowly as the year progresses.”
The CML said that the introduction of home information packs may explain lending for purchases falling from 78,000 mortgages in November to 62,000 in December.
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