15Nov

The Financial Conduct Authority (FCA) has published data showing that mortgage lending in the UK has reduced by more than half in the space of a decade.

In 2007, which might be said to be immediately before the ‘credit crunch’, mortgage lenders granted 2,130,200 new loans, yet in 2016 the equivalent figure was just 1,088,700. These figures exclude internal product switches.

Even though the Bank of England base interest rate has remained at 0.5% or 0.25% ever since 2009, fixed rate mortgages have also increased in popularity. 89% of the mortgages taken out last year were fixed rate deals, compared to 73% in 2007.

The data also shows that many borrowers are being forced to take out mortgages over longer terms, perhaps to ensure they can afford the repayments. 25 years is often spoken of as being the traditional repayment term for a mortgage, however as many as 39% of the deals taken out in 2016 had a term of longer than this. In 2007, 17% of mortgages were set up to run for more than 25 years. When we look solely at first-time buyers, 62% of the mortgages taken out in 2016 had a term of longer than 25 years, and 34% were set up for longer than 30 years. Indeed, the most common mortgage term for a first-time buyer is now 35 years.

People also look set to be saddled with mortgage debt well into their sixties. Based on the mortgages taken out in 2016, 44% of home movers and 22% of first time buyers will be aged over 65 once their mortgage term ends.

In 2016, only 22% of first-time buyers were from the 18-25 age group, and in London, the figure was much lower at just 10%. The equivalent figures in 2007 were 30% and 17% respectively. The average first-time buyer deposit in 2016 was £50,000, compared to £36,000 in 2007. Borrowers in Greater London had to find as much as £126,000 for an average deposit in 2016.

Interest-only mortgage lending has reduced dramatically, and there are now rules in place preventing lenders from granting interest-only loans unless the borrower has a credible plan for repaying the capital. Relying on the sale proceeds of the property at the end of the mortgage term being sufficient to repay the capital balance is no longer acceptable. In 2007, as many as 32% of mortgages were arranged on an interest-only basis, but this had reduced to just 4% by 2016.

The number of mortgages with a loan to value of 95% or more has fallen dramatically. In 2007, 5% of mortgages had a loan to value of this size, but in 2016 only 0.4% of loans met this criterion.

The ability of borrowers to switch to a new lender also appears to have decreased. There was a 71% fall in re-mortgagers changing lenders from 2007 to 2010, since when the number of people re-mortgaging has stayed largely unchanged.

In some other respects, the mortgage market has started to recover since the start of the current decade. The total value of the UK’s mortgage lending fell by 59% from £292 billion in 2007 to £121 billion in 2010. This figure was back up to £180 million by 2016. The average size of a mortgage loan fell to a low of £131,000 in 2009, but had risen to £180,000 by 2016.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.