First-time buyers paid 7.4 per cent more on average for home purchases in February 2015 compared to a year ago, according to the latest ONS house price index.
Prices for first-time buyers were higher than for existing owners (7.2. per cent) as well as compared to the overall price increase of 7.2 per cent in the year to February.
Lending to first-time buyers also narrowed in the second month of this year, both compared to January and to February 2014. CML’s latest lending data shows that the number of loans advanced to first-time buyers fell to 18,700, down by 1 per cent on January and by 16 per cent on February 2014. The value of these loans (£2.7 billion) was by 4 per cent lower compared to a month ago and was down by 13 per cent on the year.
Despite the declines first-time buyer lending was the second highest level in the month of February since 2007, behind only last year’s February level. However, there were still 13 per cent fewer loans advanced in 2014 compared to lending levels seen in 2007, the CML said.
First-time buyer affordability remained almost stable with typical loans standing 3.37 times of their gross income in February, compared to 3.38 in January. The typical gross income of a first-time buyer household was £38,500 in February compared to £38,456 in January.
First-time buyers in February paid 19.0 per cent of gross income towards covering capital and interest payments, little changed from 19.2 per cent in January but still significantly less than the recent peak of 24.8 per cent in December 2007.
The typical loan size for first-time buyers decreased month-on-month to £124,000 in February, down from £124,700 in January.
The general cooldown on the housing market has been blamed chiefly on seasonal effects and the uncertainty ahead of the General Election in May.
“The latest CML figures show that, following January’s unconvincing start to the year, the malaise affecting the mainstream mortgage market has extended into February. That homeowner purchase, first-time buyer and home mover activity is down on February last year is rational given the strong start to 2014, but it is more of a concern that all three indicators decreased on a monthly basis, too. Hopefully, this is just a case of pre-election jitters and not anything more widespread.
“The only saving grace for the mortgage market at present is the buy-to-let sector which has recorded a solid annual improvement, but even that hasn’t been immune to a month-on-month dampening.
“It may well be the case that the current picture is maintained until the election and we then see a strong second half to the year as the uncertainty disappears, creating the reverse pattern of what we saw in 2014,” commented Danny Waters, chief executive of Enterprise Finance, a specialist distributor focused on secured loans, bridging finance and commercial mortgages.
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