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First-time buyer numbers on the up

First-time buyer numbers on the up

Category: Mortgages

Updated: 11/04/2014
First Published: 11/04/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The number of first-time buyers (FTBs) coming onto the market has soared over the last year, with figures from the Council of Mortgage Lenders (CML) revealing that 22,200 loans were advanced to FTBs in February – a rise of 41% compared to February 2013.

This was also a marginal increase (2.3%) on January's figure despite the expected seasonal slowdown, and in terms of value these home loans totalled £3.1bn – exactly the same figure as January, but an annual increase of 55% over the year.

It would indicate that a lot more first-time buyers are able to get on the ladder than they could previously, and, happily, they're able to do so with greater affordability too. FTBs spent an average of 19.2% of their gross income on mortgage repayments in February, a drop from 19.5% the previous year and only slightly higher than the recent lows of 19.1% recorded in just three months over the last two years.

Not only have record low mortgage rates been able to help, but it's the increased availability of high loan-to-value (LTV) mortgages overall that have had a significant impact on FTB numbers.

Incentives such as the Government's Help to Buy scheme seem to be paying off. The mortgage guarantee element helped transform the market and made high-LTV mortgages far more accessible, and given these loans are typically the preserve of the first-time buyer it could go a long way to explaining the increasing number of FTBs able to get on the ladder.

Additional research from e.surv backs up this trend. The figures show that, in March this year, high-LTV loans accounted for one-in-six (15%) of all mortgages advanced during the month. In total there were 9,628 loans approved for borrowers with a deposit of less than 15%, a full 50% more than in March 2013.

High-LTV lending and first-time buyer numbers overall are expected to continue picking up, particularly as the Government has just announced plans to extend the equity loan element of the Help to Buy scheme until 2020.

Rising house prices will no doubt fuel this trend even more, as prospective buyers look to purchase their home before prices become prohibitive, but there are expectations that the implementation of new affordability checks following the Mortgage Market Review (MMR) could constrain things somewhat, at least in the short term.

"The new regulation of mortgages that takes effect at the end of April is a significant change. The industry is ready for the transition, although there is clearly potential for lending to be distorted temporarily over the coming months," said Paul Smee of the CML.

This is a view backed up by e.surv's Richard Sexton, who said that "MMR may slow lending while lenders adjust to the new rules", but in the long run it will actually be a positive move for the industry as well as for first-time buyers themselves. "It will ensure borrowers are better informed about important financial decisions, and protected against making potentially detrimental choices," he added.

The trend of high-LTV lending isn't expected to slow down to a significant extent, and with more support and continuing availability of high-LTV loans there should be more scope for first-time buyers to get on the ladder. It's a great time to get involved, particularly as mortgage rates are so affordable, but they won't last forever – if you want to benefit and keep your payments as low as possible you'll want to fix to a low rate while you still can, so check out the best rates available and be part of the trend.

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