A total of 68,200 first-time buyers have been approved for a mortgage in the second quarter of this year, the highest number since 2007.
According to the CML (Council of Mortgage Lenders), the increase, along with growth in lending to home-movers, has resulted in a jump in total house purchase lending. Remortgage lending dipped back in June compared to May, although continues to trend above levels earlier this year.
First-time buyers
CML data shows that 25,300 loans were advanced to first-time buyers in June, a 30 per cent increase on the 19,400 loans advanced in June last year. Following the strength in first-time buyer activity in May and June, quarterly lending to first-time buyers was at its highest since 2007.
First-time buyers continued to increase the amount they borrowed – with an average loan size of £117,000 in June up from £112,500 in May. As a result of this there has been a stronger growth in the value of loans advanced to first-time buyers which totaled £3.5bn – an increase of 9 per cent in value compared to May and 40 per cent on June last year.
This is likely to be associated with the growth in house prices in recent months – in June 34 per cent bought a home less than £125k, down from 37 per cent in May.
While first-time buyers borrowed more in June, an increase in income, along with falling interest rates mean that there has been no deterioration in the affordability of these loans as typical first-time buyers mortgage payments consumed 19.3 per cent of first-time buyers’ income – unchanged from May.
Home movers
Lending to home movers continued to grow on a year-on-year basis, albeit at a slower rate than for first-time buyers. Some 30,100 loans were advanced to home movers in June, a 6 per cent increase compared to June last year. The value of these loans totaled £5.1bn.
Remortgage lending
While remortgage lending dipped in June, growth in the first two months of the quarter resulted in an increase in the second quarter compared to quarter one. Remortgage lending continued to trend above last year’s levels (based on both the second quarter and the June total), although remains subdued compared to historical levels.
Interest rates
Recent falls in rates have contributed to a record take-up of fixed rate mortgages in June which represents 86 per cent of all mortgages. This is the highest level of fixed rate mortgage uptake at any point for at least 20 years.
Funding conditions have shown improvement, in particular the funding for lending scheme helped stem the upwards pressure on rates seen through the first half of 2012. Rates continued to show a downward movement in June with fixed rates falling to 3.40 per cent on average. This is well below the 4.25 per cent recent peak last August and somewhat below the previous recent low of 3.69 per cent at the end of 2011.
Paul Smee, director general of the Council of Mortgage Lenders, commented:
“First time buyers have become a strong driver in the growth of mortgage lending this year proving that market conditions are favourable for them.
“With increased interest in home buyers ability to cope with the eventual rise of interest rates, it is particularly reassuring to see borrowers choosing to fix their payments and for longer in record numbers.”
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