First-time buyer mortgages highest in five years – The Guardian
The number of first-time buyers entering the housing market reached 216,000 in 2012, the highest in five years and a further sign that the mortgage drought for new borrowers is beginning to ease.
Figures from the Council of Mortgage Lenders (CML) showed the number of new first-time buyer loans increased by 12% year-on-year to exceed 200,000 for the first time since 2007. The overall number of mortgages was also at its highest since 2007, with a total of 540,200 worth £80.9bn advanced over the year.
House prices peaked in 2007 in the run-up to the collapse of Northern Rock. This was followed by a downturn in prices and the credit crunch, which saw lenders reduce maximum loan-to-values on mortgages and tighten their borrowing criteria.
The CML’s data showed that lending for first-time buyers strengthened towards the end of 2012, following the introduction of the government’s Funding for Lending scheme in August, which made cheap funds available to banks and building societies.
A total of 60,500 loans worth £7.6bn were advanced to first-time buyers in the last quarter of 2012, an 8% increase from the third quarter and up by 14% compared to the fourth quarter of 2011.
New buyers accounted for 42% of all house purchase lending, above the 38% seen through the rest of the year.
The number of high loan-to-value mortgages on offer to new buyers increased during the year, and the CML said there was “a modest but discernible increase” in lending at these levels.
The average loan-to-value ratio stayed at 80%, where it has been for two years, but the CML said this masked the fact that one in 40 first-time buyers took out a 95% mortgage in the last quarter of 2012, compared with fewer than one in 100 a year earlier. Around one in five first-time buyers borrowed 90% or more.
The number of first-time buyer mortgages was down 12% in December on the previous month, at 19,100, but a fall is typical at the end of the year.
Lending to home movers dropped by 15% to 25,900 loans, a 9% decrease on December 2011.
“Despite the seasonal dip in lending that we normally see in December, the underlying trend for year-on-year increases in house purchase activity continued in 2012,” said the CML’s director general, Paul Smee.
“First-time buyers, in particular, have benefitted from the effects of better funding conditions and the Funding for Lending scheme, with the number of new people moving into home-ownership in 2012 reaching the highest level for five years. This, along with other factors, confirms that lenders really are open for business.”
As well as an increase in the number of first-time buyer mortgages available, with Barclays amongst those re-entering the market with its Family Springboard mortgage, there has been a flurry of new best-buy deals for borrowers with larger deposits.
Recent weeks have seen lenders battle to offer the lowest rates, with First Direct offering the lowest ever five-year fix at 2.69% and Chelsea building society the lowest two-year deal at 1.89%.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said it was “not too early to call the end of the mortgage impasse”.
“The cost of borrowing has dropped across the market, with rates on higher loan-to-values also falling.