Funding for Lending little help to first-time buyers

The Funding for Lending scheme IS working – but largely for better-off purchasers with large deposits, and not first-time buyers.

Overall, the numbers of products available have gone up and rates have fallen. But first-time buyers have fewer mortgages to choose from than six months ago, and for those needing a 95% mortgage, rates have gone up, not down.

Since the scheme was launched in August, the number of mortgages available for borrowers has risen, with an extra 95 two- and five-year fixed products added this month alone.

Compared with six months ago, the total number of mortgage products has risen 17%  from 2,365 to 2,781. The number available when Funding for Lending launched was 2,373.

Over the last six months, there has been a 46% rise in the number of 60% LTV products, and a 23% rise in the number of 60%, 75%, and 80% LTV products.

But while there has been a rise in mortgage products suitable for first-time buyers with only 10% deposits since Funding for Lending launched, there are fewer than six months ago. In May, there were 274 90% LTV products available, compared with 258 now. The latter figure is however up from the 242 in August.

For first-time buyers with only a 5% deposit, there are now six more products than there were in August offering 95% LTV. But the cost of these products has actually risen, albeit by just 0.01%, to stand at 5.83%. That compares with the average rate for an 80% mortgage, which has fallen 0.09% to 4.01%.

Clare Francis, at MoneySupermarket, said: “The Funding for Lending scheme definitely seems to be having a positive impact on the mortgage market.

“Our analysis shows there are now many more mortgages available than there were six months ago, although it is those borrowers who have the largest amount of equity in their homes who continue to benefit the most.

“That said, it is great to see that a number of lenders, including Santander and the Co-operative Bank, have launched new 90% mortgages in recent weeks and that Nationwide doubled the amount it lent to first-time buyers between March and September.

“Many lenders claim their doors are open for business, but the perception has often been different, particularly for first-time buyers.”

At Moneyfacts website, Sylvia Waycot said that as far as Funding for Lending is concerned, it is not time to hang out the bunting yet.

She said: “The first-time buyer market has not benefited from any dramatic change of fortune.”

She added: “A first-time buyer with a deposit and a secure job is not a high risk; it is just someone trying to get a foot on to the housing ladder.”

* Meanwhile, figures from the Council of Mortgage Lenders show that a total of 10,000 first-time buyers took out a mortgage in London in the third quarter of 2012. This was the highest number in the capital in a single quarter for almost three years.

According to the CML, despite only a 50% level of home ownership in London – the lowest in the UK – the sheer size of the capital and the fact it is so expensive means that it has accounted for 28% of the value of all first-time buyer lending in the last year.

The CML says the average age of a first-time buyer in London is 31 compared with 29 for the rest of the UK.

The average first-time buyer household in London has an income of £50,000 compared to £34,000 in the UK overall.

First-time buyers in London make up a larger proportion of the total mortgage market – around 50% compared to around 40% in the UK overall.

Loans for house purchase overall in London increased in the third quarter, as in the rest of the UK.

A total of 20,600 house purchase loans (worth £5,070m) were advanced in London, up by 22% compared to the second quarter and a 4% increase compared to the same period last year.

This rate of growth compared favourably to the UK overall, where house purchase lending increased by 13% on the second quarter. The total value of loans for house purchase (5,050m) marked the highest figure since the last quarter of 2007.