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Number of homebuyers falls to nine-year lowHilary Osborne guardian.co.uk, Tuesday March 11 2008 Article historyAbout this articleClose This article was first published on guardian.co.uk on Tuesday March 11 2008. It was last updated at 12:08 on March 11 2008.

Number of loans for purchases fell by 19% between December and January. Photo: Getty/Graeme Robertson

The number of mortgages taken out for house purchases fell to its lowest level for nine years in January, figures showed today, offering further evidence that the credit crunch is continuing to affect the UK property market.

On the same day surveyors reported a slump in demand for properties, the Council of Mortgage Lenders (CML) said the number of loans for purchases fell by 19% between December and January to just 50,300.

The figure is a third lower than the 75,800 recorded in January last year, and the lowest since the beginning of 1999, the CML said.

The value of these loans declined to a total of £7.8bn. This represents a 17% fall from December's figure of £9.4bn and a 31% fall from the £11.2bn paid out in January 2007.

The CML's figures also showed a continuing decline in the number of first-time buyers entering the market, with just 18,000 taking out mortgages in January compared with a peak of almost 34,000 in June last year.

At the same time, the median amount borrowed by first-timers also fell from more than £118,000 to £115,000.

The CML's director general, Michael Coogan, said the credit crunch was driving the slowdown.

"The wholesale funding markets remain largely closed, and mortgage funding still remains constrained," he said.

"This is now having a discernible impact on lending criteria and the ability of first-time buyers to get into the housing market."

The CML figures show the amount typically borrowed by first-time buyers in January had fallen from 90% to 88%. The withdrawal of a raft of high loan-to-value mortgages in recent weeks mean this is likely to continue in the coming months, as is the decline in the number of first-time buyers.

Help for new buyers

Coogan called on the government to make changes to help first-time buyers in tomorrow's budget.

"[it] presents a perfect opportunity for the government to do what it can to help first-time buyers by raising the stamp duty threshold," he said.

"While we don't believe there is one silver bullet solution to problems in the wholesale funding markets, we welcome the Treasury's recognition of the problem and willingness to work with the industry," he added.

"However, we are unconvinced that a new kitemark 'gold standard' for mortgage securities is the solution, or that consumers will move to longer-term fixed-rate mortgages without financial incentives."

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said the data backed up his organsition's claims that the credit crunch was hitting first-time buyers.

"Not only are the volume of mortgages falling sharply, but loan-to-value ratios are also being reduced. This is consistent with much other anecdotal evidence," he said.

"First-time buyers are very much under the cosh in this more hostile environment. While any increase in the stamp duty threshold in tomorrow's budget would provide borrowers trying to take their steps on the housing ladder with some assistance, the scaling back of lending activity is likely to limit the extent of any benefit."

Despite the slowdown in loans for purchases, the CML reported an increase in total lending over the month, thanks to a recovery in remortgaging activity.

A total of 85,000 homeowners switched lender during the month - a 49% rise on December's figure of 59,000, which brought the figure back in line with the recent trend.

Across the board, borrowers continued to move away from fixed-rate deals, encouraged by more competitive rates on discount and tracker mortgages and hopes of further interest rate cuts.

Fixed-rate loans represented 57% of loans in January, down from a peak of 77% last June, when rates were still thought to be on an upwards trajectory

panic setting in now their cosy fixed term rates are done

Edited March 11, 2008 by subby