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Housing market strengthens with new mortgages

Housing market strengthens with new mortgages

Category: Mortgages

Updated: 26/02/2014
First Published: 26/02/2014

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 It is now over 6 months old so the content may be out of date.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 housing market continues to go from strength to strength as approvals of new mortgages for house purchase hit their highest level since September 2007.

According to statistics from the British Bankers' Association (BBA), mortgage approvals for purchasing a house were up 57% from January a year ago, and are now at their highest level for over six years. Meanwhile, approvals for remortgaging were also up, increasing 51% compared to a year ago.

Total mortgage lending by the BBA's members was 38% higher in January than a year ago, most likely helped by mortgage assistance schemes such as Help to Buy (H2B).

The H2B scheme has been fuelling the first-time buyer (FTB) mortgage market as it has helped improve availability of 95% loan-to-value (LTV) mortgages. In fact it has made it possible to buy a new-build or existing home priced up to £600,000 with as little as a 5% deposit.

BBA statistics director, David Dooks, said: "Following on from last month, mortgage borrowing continues to rise compared to a year earlier, as mortgage assistance schemes help first-time buyers and housing chains more generally.

"Approvals for new purchases have climbed quite significantly and are now at their highest point since September 2007."

There are two stages of the H2B scheme. The first, the equity loan phase, is for those wanting to buy a new build home and sees the Government lend you up to 20% of the cost of the purchase with no loan fees for the first five years. You will then put down a 5% deposit and a 75% mortgage will make up the rest.

The second stage is the Mortgage Guarantee and this is available for both new and existing homes. Again, you'll need a 5% deposit but this time you'll need the full 95% LTV mortgage, with the difference being that the Government will act as guarantor for up to 20% of the amount. This means the risk to participating lenders is lowered and they are happier to lend at higher LTVs.

Shared ownership, Right to Buy and New Buy, as well as other schemes run by local authorities, are also available to help anyone wanting to realise the dream of owning their own home.

Further evidence that H2B is driving the housing market forward is housebuilder Persimmon's strong performance over the last year, with them reporting a 50% profit increase on last year and stating that they anticipate a further year of encouraging sales growth.

It looks to be all guns blazing for the housing market, and perhaps you are turning your mind to buying your first home. So, what next?

Check out first-time buyer mortgages

Compare overall best mortgage deals

Use our mortgage calculator

Check out the mortgage guides

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