Tightening in lending criteria abates

The CML said easing may occur over the summer because some higher loan-to-value products came on to the market in recent months and lenders have reported that they intend to increase lending at higher loan-to-value ratios in the Bank of England's recent Credit Conditions Survey.

The latest research also shows that a higher proportion of young first-time buyers than ever before are getting help from parents to enter the market. Around 80% of first-time buyers under 30 are likely to be receiving help from parents as they are unable to build up the deposits needed to enter the market.

Since reaching a record 25% in February, the average first-time buyer deposit has remained unchanged and the typical first-time buyer income multiple has held at 2.97 from April. First-time buyer numbers were little changed with 14,000 loans worth £1.5bn in May, compared with 13,700 loans worth £1.5bn in April.

The number of loans for house purchase edged up 4% from April to 37,400 but this is still 28% lower than the number of loans in May 2008. Remortgaging volumes remained extremely weak with 29,000 loans in May, a 9% fall from April and a 63% decline from a year earlier. Demand for remortgage is falling away as many borrowers who are exiting fixed rate periods find themselves reverting to relatively attractive standard variable rates.

Home movers typically borrowed 67% of the value of the property in May, unchanged from April, and borrowed 2.68 times their income, up from 2.63 in April. There was a slightly larger increase in activity amongst home movers with 23,500 loans compared with 22,300 loans in April.

Fixed rate products accounted for 74% of all loans in the month, the highest share since August 2007. They continued to take an increasing proportion of new business as borrowers may be seeking certainty over future payments.

Paul Samter, economist at the CML, said: "Lending remains at very low levels, with the modest increase in house purchase activity off-set by a fall in remortgaging. The trend of tightening lending criteria seems to have subsided and we may see a modest easing in these measures over the summer, which will help some borrowers. But overall, access to mortgage finance will still be constrained by the diminished number of active lenders and shortage of funding available to them."