The number of first-time buyers reached its largest yearly total in five years, according to new data released by the Council of Mortgage Lenders.
A total of 216,200 first-time buyers became homeowners in 2012, the first time the annual total has exceeded 200,000 since 2007, a year-on-year rise of 12 per cent on 2011 when 193,000 loans were advanced.
On a monthly basis, lending to first-time buyers, home movers and remortgage lending all eased in December, reflecting the usual seasonal factors.
First-time buyers
The fourth quarter total – which is less affected by “noise” and seasonal trends than the monthly figures – showed that lending to first-time buyers continued to strengthen. There were 60,500 loans advanced in the last quarter of 2012, worth £7.6 billion, an 8 per cent increase from the third quarter and up by 14 per cent compared to the fourth quarter of 2011.
There was also a modest but discernible increase in lending at higher loan-to-value ratios in the last quarter. While the average loan-to-value ratio stayed at 80 per cent, where it has been for two years, this masks some encouraging movement in higher loan-to-value lending. For example, 1 in 40 first-time buyers took out a 95 per cent mortgage compared with less than 1 in 100 a year earlier.
Home movers
In the fourth quarter, home mover lending fell, suggesting that the drop in December may not have been entirely due to seasonal factors. In the fourth quarter, a total of 84,900 loans were advanced to home movers, down by 3 per cent on the previous quarter.
Lending to home movers increased year-on-year, however, rising by 3 per cent compared to 2011.
House purchase lending
In the fourth quarter, the number of loans advanced increased compared to both the third quarter and the same period in 2011. There were 145,400 loans advanced, up from 143,500 in the third quarter.
Despite the fall in house purchase lending at the very end of the year, strong month-on-month increases throughout much of the year led to a 6 per cent (7 per cent by value) increase in house purchase lending in 2012 compared to 2011. A total of 540,200 loans were advanced worth £80.9 billion, the largest annual total since 2007.
Remortgage lending
Following subdued remortgage lending throughout 2012, there was a 13 per cent fall in 2012 overall. This pattern continued in December when the value of remortgage lending (£2.8 billion) was 18 per cent lower than the previous month and down by -22 per cent compared to the same period in 2011.
More positively, there was a 5 per cent increase in the fourth quarter total when compared to the previous quarter.
Interest rates
The improvement in funding conditions, and in particular the Funding for Lending scheme (FLS) have stemmed the upwards pressure on interest rates seen through the first half of the year.
This is particularly true for fixed rate loans, the rates on which peaked at 4.25 per cent on average in August (coincidentally when FLS was launched) and have subsequently fallen to 3.84 per cent. Fixed rate loans became increasingly popular throughout 2012 – overall 69 per cent of mortgages in 2012 were advanced on a fixed rate, up from 62 per cent in 2011 and the largest proportion since 2007. This preference for fixed monthly payments was prevalent among first-time buyers, 83 per cent of whom opted for a fixed rate loan in 2012.
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