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Mortgages at lowest costs since 2004

The servicing cost of UK mortgages is now at its lowest levels since 2004, according to the Council of Mortgage Lenders.

The CML says although borrowers still need large deposits to be able to enter the market, and overall lending remains constrained, both first-time buyers and home movers are benefiting from the lowest debt servicing costs since 2004.

It says house purchase lending accounted for 35 per cent of all mortgage lending in March, up from 31 per cent in February and the highest proportion since December 2007.

Remortgaging, on the other hand, still accounted for a higher number of loans in March, but the number was only 8 per cent higher than in February and 45 per cent lower than in March 2008.

The CML says it expects remortgaging to remain muted, both because of attractive reversionary rates automatically cutting in for many borrowers as they come out of their existing deals, and because of reduced remortgaging opportunities for those with reduced levels of equity as a result of falling house prices.

CML head of research Bob Pannell says: “For those who can, the burden of debt payments is low and mortgage interest is consuming proportionately less income than for a number of years. This is good news for now. Even so, a mortgage is a long-term commitment. People borrowing now should be mindful of the years ahead when interest rates eventually rise, as they will.

“But for those without substantial deposits, entering the market is still both difficult and uncertain. While there are some signs of demand increasing, house prices remain weak and lending criteria inevitably remain inherently conservative as lenders necessarily seek to rebuild their capital position.”

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