Loans to UK First Time Buyers Hit Highest Level Since 2007

Figures just released by the Council of Mortgage Lenders in the UK show 25,300 loans were advanced first-time buyers in June. This is a 30% increase on June last year, and the strength of lending for the last quarter was at its highest since 2007.

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In addition, first-time buyers are increasing the amount they borrow with the average loan size reaching £117,000 in June compared to £112,500 in May. As a result the value of loans advanced first-time buyers increased by 9% compared to May last year, and by 40% compared to June last year. The increase in loans is likely to be associated with the increase in house prices in recent months. In June, 34% of first-time buyers bought a home for less than £125,000 compared to 37% in May.

Although first-time buyers are borrowing more, pay increases and falling interest rates have meant this has not affected the affordability of these loans. In June, the monthly repayments of a typical first-time buyer accounted for 19.3% of their income, unchanged from May. The CML had previously noted a small increase in the average loan-to-value ratio for loans advanced to first time buyers, but the latest figures show this to have dropped back to 80%. However figures for the second quarter are less affected by monthly fluctuations and showed a slight increase to 81% compared to 8% in previous quarters.

In June, first-time buyers accounted for 46% of all house purchase loans, up from 44% in May, and much higher than the 38% average seen in 2007. Lending to homeowners this is still beginning to grow, albeit more slowly than for first-time buyers. There were 30,100 loans advanced to home movers in June which is a 6% increase compared to June last year. The value of these loans was £5.1 billion. In the second quarter of the year there were 83,500 loans advanced home movers, an increase of 27% compared to the first quarter of this year, and an increase of 4% compared to the second quarter in 2012.

There were a total of 151,600 loans advanced for house purchases in the second quarter, an increase of 30% compared to the first quarter, and an increase of 17% compared to the same period in 2012. The value of loans advanced in June was £8.5 billion, an increase of 16% compared to June last year. Low interest rates have meant that fixed rate mortgages in June accounted for 86% of all mortgages, the highest level of fixed rate mortgage uptake for at least 20 years.