Rise in new mortgage sales hides 'two-speed market' as homeowners fail to refinance

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The number of mortgages taken out to buy a home rose to the highest level for almost two years in October as the housing market continued to rally.

The Council of Mortgage Lenders said that 55,000 mortgages were taken out for purchases in October, the highest monthly total since December 2007. The figure is more than double the January 2009 low of 23,000 and is a 9 per cent rise on the previous month.

Property Buyer

The number of home loans advanced to remortgage borrowers and first-time buyers remained unchanged between September and October. However, the figures were viewed as a sign that low interest rates for those with large deposits, together with recent house price rises, are encouraging those who are able to move to take advantage of the favourable market conditions.

The number of loans to home movers - a group that does not include first-time buyers - rose by 15 per cent between September and October, with the bulk of borrowers opting for tracker mortgages as evidence grows that interest rates are set to remain low for the long term.

Michael Coogan, director-general of the Council of Mortgage Lenders, said: "We are still in a two-speed mortgage market. It appears that low interest rates for those with substantial deposits, coupled with this year's sustained increases in house prices, are encouraging more people to buy or move.

"But the same low rates that are driving house price activity provide little incentive for borrowers to refinance their loans. This, coupled with tightness in lending criteria, continues to hold back the remortgage market."


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