First-time buyer activity is thriving, say lenders

First-time buyer activity remained strong in March with the number of first-time buyers increasing by 20% over February, according to the Council of Mortgage Lenders.

A total of 19,100 loans worth £2.4bn were advanced to first-time buyers in March, up from 15,900 loans in February.

The number was down on the 24,400 loans advanced in March last year – as expected.

March 2012 marked the end of the first-time buyer Stamp Duty holiday and resulted in a significant jump in activity, making meaningful year-on-year comparisons difficult.

Despite the spike in March last year, first-time buyer lending activity over the first quarter of this year fell only marginally short of activity in the first three months of 2012. Overall, 50,900 loans were advanced to first-time buyers in the first quarter of this year, compared with 51,200 loans in the first quarter of 2012.

While the loan-to-value ratio for first-time buyers remained at 80%, there has been a gradual increase in the proportion of first-time buyers taking out loans with a deposit of 10% or less.

In the first quarter of the year one in four first-time buyers put down a deposit at 10% or less – up from one in five in the first quarter of last year. First-time buyers also typically borrowed a slightly larger amount in March than in February, both in absolute terms and relative to their income.

Altogether, first-time buyers in March accounted for 45% of all house purchase loans, up from 43% in February.

The increase in first-time buyer loans, as well as the small rise in the number of home movers, contributed to a monthly jump in house purchase lending during March, says the CML.

Remortgage lending also increased compared to February but remained flat over the first quarter.

In line with the expected seasonal pattern, house purchase lending picked up in March compared to the first two months of the year. Altogether, a total of 42,000 house purchase loans were advanced in March, a rise of 15% on February’s lending. While 19% down on March last year, this was again due to the distortion in the market caused by the ending of the Stamp Duty holiday.

On a quarterly basis, 116,200 loans were advanced for house purchase in the first quarter (worth £17.2bn), a 21% fall compared to the fourth quarter of 2012 and down by 5% compared to the first quarter of last year.