UK sees more first time buyers granted property loans

First timers get more options for loans for homes

There has been a resurgence in the number of first time property buyers in the UK being granted loans, according to the latest figures from the Council of Mortgage Lenders.

Increasing the number of homeowners able to get in the first rung of the property ladder is regarded as the key to reviving the country’s lackluster real estate market.

The data reveals that June saw the highest number of mortgages taken out by first time buyers for 10 months. There were 18,100 loans to firs -time buyers, worth £2.2 billion, 24% higher by volume and 29% higher by value than in May.

June’s first time buyer numbers were exactly the same as in last August, but 8% lower by volume and value than in June 2010.

The figures also shows that home movers took out 28,600 loans, worth £4.6 billion, in June, up from 23,800, worth £3.7 billion in May, but down from 32,800 loans, worth £5.3 billion, in June 2010.

Overall, there were 46,700 loans for house purchase, worth £6.7 billion, in June, up 22% in volume and value from May, but down 11% by volume and 13% by value on June 2010.

Remortgaging was unchanged in June, totaling 30,700 loans worth £3.8 billion. Unlike lending for house purchase, however, remortgaging was up 10% by volume and 9% by value on June 2010.

Lending for house purchase increased in the second quarter. Between April and June, there were 122,000 loans for house purchase, worth £17.6 billion, up from 97,200, worth £14.1 billion, in the first quarter. Nevertheless, lending for house purchase was lower than in the second quarter last year, when there were 138,300 loans, worth £20 billion.

Between April and June, lenders advanced 87,600 remortgaging loans, worth £10.8 billion, down from 92,700, worth £11.2 billion, in the first quarter, but up from 78,400, worth £9.8 billion, in the second quarter of 2010.

There was little change in lending requirements for first time buyers and home movers in June. First time buyers, on average paid a 20% deposit, unchanged since February. First time buyer deposits are lower than the high of 25% seen throughout 2009, but higher than the historic norm of 10%. Home movers took out a mortgage worth 70% of their property’s value for the second month. This figure has barely moved over the last few years.

The popularity of fixed rate mortgages continued to edge up in the second quarter, with 63% of borrowers opting for a fixed rate, compared to 60% in the first quarter and just 46% in the second quarter of 2010. While no immediate rise in interest rate rises is expected, uncertainty over when the first rise will come may have been incentivising borrowers to fix their rates in the second quarter.

The trend away from interest only mortgages continues for all borrowers, with 87% of house purchase loans in June taken out on a repayment basis, up from 86% in May. This is likely to persist as future home movers and remortgagers continue to take out future mortgages on a repayment basis.

‘Whilst there are clearly financial uncertainties ahead, it is encouraging to see more house buyers surfacing at the start of summer. Recent increases in Bank of England approvals figures also show that more completions are expected in July, so the more encouraging numbers may persist for a while,’ said CML director general Paul Smee.

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