First-time buyer market is best in five years, say lenders

The number of first-time buyers in 2012 reached the largest yearly total in five years – with the market now said to be primed for growth.

New figures from the Council of Mortgage Lenders were greeted as green shoots.

Estate agent Peter Rollings, CEO of Marsh & Parsons, said: “Nearly one-fifth more first-time buyers were able to get on to the property ladder in December compared to two years ago, and if this trend persists it will help unfreeze property chains, allowing moves higher up the market.

“Lenders seem to have a renewed confidence in the housing market, and if they continue to increase their commitment, 2013 will be a real year of progress for prospective home buyers.”

Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said: “With one in 40 taking out 95% mortgages, compared with less than one in 100 a year ago, it is clear that lenders’ confidence in market conditions is returning. 
 
“The impact of the Funding for Lending scheme is not only boosting volumes and lowering pricing, but also encouraging lenders to consider higher levels of risk in order to help more borrowers on to the property ladder. Already one in five first-time buyers are borrowing 90% or more.”

A total of 216,200 first-time buyers became home owners in 2012, according to the CML.

It is the first time the annual total has exceeded 200,000 since 2007, and represents a year-on-year rise of 12% on 2011 when 193,000 first-time buyer loans were advanced.

In December 19,100 loans were advanced to first-time buyers, a 12% drop compared to November but up by 3% on December 2011.

In the fourth quarter, first-time buyers accounted for 42% of all house purchase lending, above the 38% typically seen.

As with first-time buyer lending, lending to home movers dipped in December. There were 25,900 loans advanced to home movers in December, a 15% fall compared to the previous month and a 9% decrease on December 2011.

Overall in the fourth quarter, home-mover lending fell, suggesting that the drop in December may not have been entirely due to seasonal factors. In the fourth quarter, a total of 84,900 loans were advanced to home movers, down by 3% on the previous quarter.

Lending to home movers increased year-on-year, however, rising by 3% compared to 2011.

Reflecting the fall in lending to first-time buyers and home movers overall, house purchase activity dipped in December. Altogether 45,000 loans were advanced in the last month of the year, down by 13% compared to November and by 4% on December 2011.

However, in the fourth quarter there was a slight rise in lending, with 145,400 loans, up from 143,500 in the third quarter.

Despite the fall in house purchase lending at the very end of the year, strong month-on-month increases throughout much of the year led to a 6% increase in house purchase lending in 2012 compared to 2011. A total of 540,200 loans were advanced worth £80.9bn, the largest annual total since 2007.

CML director general Paul Smee said: “Despite the seasonal dip in lending that we normally see in December, the underlying trend for year-on-year increases in house purchase activity continued in 2012.

“First-time buyers in particular have benefited from the effects of better funding conditions and the Funding for Lending scheme, with the number of new people moving into home ownership in 2012 reaching the highest level for five years.

“This, along with other factors, confirms that lenders really are open for business.”