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Mortgage boost for first time buyers

Mortgage boost for first time buyers

Category: Mortgages

Updated: 11/08/2011
First Published: 11/08/2011

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More first time buyers are being successful in their application for a mortgage after it was revealed the number of loans approved for those taking their first step onto the property ladder reached a 10-month high in June.

Mortgage loans to first time buyers during the month reached their highest number since August last year, according to the Council of Mortgage Lenders (CML).

Volumes were 24% higher than in May, although they still remained 8% down on a year earlier.

At the same time, it was revealed first time buyers paid, on average, a 20% deposit, for their first house.

It is a figure which has remained unchanged since February, but is lower than the high of 25% seen throughout 2009.

Paul Hunt, managing director of Phoebus Software, said the rise in the number of loans to first time buyers showed the improving affordability of both properties and mortgages is having an impact on lenders' confidence.

"With rates set to remain low for the foreseeable future, we can expect mortgage rates to sink even lower than Chelsea BS five year fix at 3.39% announced last week," he added.

"Mortgage repayments fell in June as a proportion of borrowers' incomes and as this is set to continue borrowers will be emboldened to lend more money to first time buyers at higher loan-to-values.

"This could be just the boost the property market has been crying out for in the last year."

Elsewhere amongst the data, it was revealed that the popularity of fixed rate mortgages continued to edge up in the second quarter of the year.

Approximately 63% of borrowers opted for a fixed rate mortgage during the period, compared to 60% in the first quarter and just 46% in the second quarter of 2010.

"While no immediate rise in interest rates is expected, uncertainty over when the first rise will come may have been incentivising borrowers to fix their rates in the second quarter," said the CML.

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