Lending to first-time buyers continues to shrink year-on-year

The number of loans advanced to first-time buyers in both March and the first three months of 2015 remained at a lower level than a year ago, the latest figures of the Council of Mortgage Lenders (CML) show.

Borrowers looking to get on the property ladder received 23,000 loans in March, which was 5 per cent lower than a year earlier.

First-time buyers took out 61,300 loans in the first quarter of 2015, an 11 per cent drop compared to the first quarter of last year and a 24 per cent decline on the fourth quarter of 2014.

In terms of value, the amount of loans taken out by first-time buyers in March reached  £3.4 billion, which was 3 per cent higher than in the same month a year earlier.

The total value of loans given to first-time buyers in the first three months of 2015 stood at £9 billion, down 5 per cent on an annual basis and 23 per cent lower than in the fourth quarter of 2014.

Compared to February, lending in March was considerably better with the number of loans exceeding the previous month figure by 20 per cent and the value beating it by 21 per cent.

First-time buyers typically borrowed 3.36 times their gross income in March, unchanged from February. The typical loan size for first-time buyers increased month-on-month to £123,290 in March, up from £122,285 in February. The typical gross income of a first-time buyer household changed slightly to £38,500 in March from £38,085 in February.

In the first quarter 2015, first-time buyers typically borrowed 3.37 times their gross income, down slightly from 3.38 in the fourth quarter 2014. The typical loan size for first-time buyers also decreased quarter-on-quarter to £122,794 from £124,450 in the fourth quarter 2014. The typical gross income of a first-time buyer household changed slightly to £38,139 from £38,324 the previous quarter.

Paul Smee, director general of the CML, commented: 

“It was a slow start to activity in the first couple of months of 2015 but the market started to get out of the dip in March, a trend that we think will continue as the year goes on.

“We will have to wait and see how the housing market reacts to the general election result and the reduction in the risk of a prolonged period of market uncertainty which could well have been damaging to businesses and the housing market.”

Mixed picture for homemover lending in March, quarterly figures fall

Loans advanced to homemovers increased month-on-month in March to 48,200 – up 16 per cent on February but down 4 per cent compared to March 2014. These loans totalled £8.2 billion, which was up 17 per cent on February and 4 per cent on March last year.

The volume of homemover loans in the first quarter of 2015 was 131,800, a decrease of 24 per cent on the fourth quarter of 2014 and an 11 per cent fall compared to the first quarter 2014. The value of these loans was £22.4 billion, down 23 per cent on the previous quarter and 5 per cent down on the same quarter in 2014.

Remortgage lending looks better

In March, remortgage lending increased month-on-month with 26,600 loans advanced – up 19 per cent on February and 6 per cent up on March 2014. The value of these loans (£4.2 billion) also increased month-on-month by 24 per cent and was up 14 per cent year-on-year compared to March 2014.

In the first quarter 2015, remortgage lending increased quarter-on-quarter with 75,400 loans advanced – up 3 per cent on the fourth quarter but down 5 per cent on the same quarter last year. The value of these loans (£11.8 billion) also increased quarter-on-quarter by 6 per cent and was up 2 per cent year-on-year compared to quarter one 2014.

Buy-to-let enjoys buoyant growth

In the first quarter of 2015, buy-to-let lending made up 18 per cent of total gross lending in the UK, which was the highest proportion of total lending since quarterly records began in the middle of 2006. This was mainly driven by both a fall in remortgage and house purchase loans to home-owners activity in this period.