14th May 2013
Loans to first time buyers increased by 20 per cent in March according to the Council of Mortgage Lenders. The Royal Institute of Chartered Surveyors says demand for residential property has not been at its current level since November 2009 with new buyer inquiries rising at the fastest rate for three years.
The CML’s research found that a total of 19,100 loans, worth £2.4bn, were advanced to first-time buyers in March, up from 15,900 loans in February but down on the 24,400 loans advanced in March 2012, which marked the end of the first-time buyer stamp duty holiday. Despite the spike in March last year, first-time buyer lending activity over the first quarter of 2013 fell only marginally shy of activity in the first three months of 2012. Overall, the CML says, 50,900 loans were advanced to first-time buyers in the first quarter of this year, compared to 51,200 loans in the first quarter of 2012.
While the loan-to-value ratio for first-time buyers remained at 80%, there has been a gradual increase in the proportion of first-time buyers taking out loans with a deposit of 10% or less. In the first quarter of the year one in four first-time buyers put down a deposit at 10% or less – up from one in five in the first quarter of last year while first-time buyers also typically borrowed a slightly larger amount in March than in February, both in absolute terms and relative to their income adds the CML findings.
In a statement, Rics added: “The increased interest in the sales market reflects in part, as we have noted previously, the success of the Funding for Lending Scheme in both bringing down mortgage rates and encouraging banks to lend higher multiples. However the latest jump in enquiries strongly suggests that the Help to Buy proposition is attracting interest even if the mortgage guarantee element of the product is not due to come into effect until next year.”
Howard Archer, chief UK and European economist at IHS Global Insight says: “Following on from an upbeat RICS survey for April, the CML mortgage advances data support belief that house prices are likely to achieve a modest gain of a few per cent over 2013, as activity picks up modestly supported by initiatives such as the Funding for Lending Scheme and Help to Buy. However, while a moderate rise in house prices over 2013 looks increasingly probable, a strong upward move still seems unlikely given an ongoing challenging and uncertain economic environment despite the recent signs of moderate improvement. In particular, very low earnings growth and still relatively low and fragile consumer confidence argues against a marked rise in house prices for some time to come.”