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First time buyers boosted by lower deposits

First time buyers boosted by lower deposits

Category: Mortgages

Updated: 14/01/2011
First Published: 14/01/2011

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 It is now over 6 months old so the content may be out of date.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 size of the deposit that first time buyers have to find to secure their first mortgage has dropped to its lowest level in two years.

The Council of Mortgage Lenders (CML) said that although credit criteria remained tight, loan-to-value ratios appeared to have eased a little, particularly for first time buyers.

Those looking to take their first step onto the housing ladder borrowed 80% of their home's value in November.

It is the second month in a row this figure has been reported, and the highest the market has seen since November 2008.

Also encouraging is the news that first time buyers took out 16,400 loans in November, a 3% increase from October.

Although the figure was 19% down on that seen in November 2009, the CML said
year-on-year comparisons were lower across all areas of the mortgage market due to the distortions caused by buyers snapping up properties before 2009's stamp duty concession came to an end.

Despite the recent relaxation in deposit requirements, Michael Coogan, CML director general, does not expect the mortgage market for first time buyers to get too much easier in 2011.

"It is encouraging to see credit criteria becoming a little more liberal for first time buyers," Coogan adds.

"But the funding and capital constraints on lenders will continue to exert a dampening effect on lending, and criteria are unlikely to loosen substantially."

Mortgage activity overall remained broadly unchanged during the month.

Loans for remortgage showed a small increase compared with October, while loans to home movers saw a slight drop.

For all home buyers, the proportion of income needed to cover the mortgage interest dropped to an all-time low of 10.7% in November.

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