First-time buyers 'yet to benefit from Funding for Lending'

Lending to first-time homebuyers increased 11% in 2012, the highest level since the onset of the credit crunch. But all the gains were in the first half of the year, and lending subsided in the second half – after Funding for Lending was introduced.

Figures from LSL valuations firm e.surv show that last year, there were 63,896 house purchase loans granted to buyers with small deposits, up from 57,691 in 2011. It marked the best year for high loan-to-value lending since 2007.

Overall, purchase approvals rose 3% from 590,425 in 2011 to 607,058 – 16% higher than they were during the market’s nadir in 2008.

But 2012 was a year of two distinct halves for first-time buyers. Although the overall number of house purchase loans were split equally between the first and second halves of the year, loans to first-time buyers fell away sharply by 13% in the second half of the year.

There were 34,217 loans to borrowers with small deposits in the first half of the year, but just 29,679 in the second half.

As a proportion of total house purchase lending, loans to borrowers with small deposits (of 15% or under) in the second half of the year dropped to 9.8%, compared to 11.2% in the first half of the year.

Overall house purchase lending also dipped sharply in December. Purchase approvals fell 9% to 49,113 from 54,036 in November, and there were 7% fewer loans than in December 2011, making it the third weakest December since records began in 1993.

Richard Sexton, director of e.surv, said he was hopeful that Funding for Lending will have more impact this year.

He said: “Funding for Lending hasn’t yet equated into more loans to first-time buyers. But this still remains a realistic prospect.”