More home loans in the UK for first time buyers, survey finds

More low income buyers were able to get mortages in 2011 than in 2010

First time buyer numbers in the UK increased markedly in 2011 as banks upped their high loan to value lending and loosened qualifying criteria on higher LTV mortgages, according to the latest Mortgage Monitor from e.surv chartered surveyors.

There were 32% more loans with a deposit of 15% or under in 2011 than in 2010, as lending conditions for first time buyers improved. There were 57,301 loans with a deposit of 15% or under in 2011, up from 43,379 in 2010, reflecting the fact more low income buyers were able to get mortgages.

There were 12,343 approvals for purchase of property worth £125,000 or under in December (typical first timer stock), up from 9,873 in December 2010. The average loan to value on first time buyer property rose to 69% in December, increasing from 66% in December 2010, as more buyers were able to access higher LTV mortgages.

Lending conditions have now eased to their most accessible level since August 2007, the survey also found. In December, the average deposit fell to 38%, down from 41% in December 2010, and fell slightly from November. In 2011 as a whole, the average deposit on a loan fell back from 43% in 2010 to 39%.

In the overall market, loans for home purchase were 3.4% higher in 2011 than 2010. There were 590,733 purchase approvals in 2011, 19,203 more than in 2010.

In December, loans for house purchases were up 19% year on year, rising from 42,448 in December 2010 to 50,836. Loans for purchases below £250,000 accounted for almost three-quarters of all loans, compared to around two-thirds in 2009, suggesting wealthier buyers are starting to represent a less disproportionate share of the market. On a monthly basis, purchase approvals fell 4%, reflecting the traditional winter downturn.

‘The market has defied the wider problems that afflicted the economy in the latter half of last year. The improvement in 2011 is modest, but when taken against the backdrop of the eurozone crisis and turgid economic growth, it’s clear the market demonstrated real staying power last year,’ said Richard Sexton, director of e.surv

‘Banks have made a concerted effort to increase the amount they lend to first time buyers, which is reflected in the big jump in higher loan to value lending. They are also supplementing this with more lending to buy to let investors,’ he explained.

But he pointed out that it is important to keep things in perspective.

‘The gains over 2011 shouldn’t be taken as a portent of a return to the sunnier climes of the pre-2008 market. 2012 will be a difficult year. Banks will pass the increased cost of funding themselves onto the consumer, and will likely focus on hoarding capital rather than new lending. A flat market looks like the best we can hope for,’ he added.

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