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First-time buyer lending reaches highest point since 2007

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  • 13/10/2015
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First-time buyer lending reaches highest point since 2007
First-time buyers accounted for 44% of total house purchase lending volumes in August, a marked increase on pre-crisis levels of 30%, Council of Mortgage Lenders (CML) figures show.

August was the highest monthly first-time buyer lending level by volume and by value since 2007, but the number of loans totalled 78% of levels seen in August 2007.

The proportion of first-time buyer gross household monthly income in August to service capital and interest payments stayed the same month-on-month at 18.5%, but remained lower than 19.7% in August last year and considerably lower than the most recent high of 24.8% in December 2007.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Excellent mortgage rates continue to attract buyers and those remortgaging as lenders remain keen to do business in order to meet their targets.”

Harris said it was encouraging that first-time buyers were not over stretching themselves, with the proportion of income-to-service mortgage payments continuing to fall year-on-year.

Overall, mortgage lending for house purchase in August was down 9% on July but up 2% on last year to total £19.7bn, the CML’s figures showed.

While first-time buyers, homemovers, remortgaging and buy to let all saw a monthly decline in lending in August, an uptick on an annual basis was found. The CML described the figures as a “normal seasonal trend” with August typically less strong for mortgage completions.

Bob Pannell, chief economist of the CML, said: “Seasonal factors pushed all categories of lending lower in August compared to July. However, the mortgage market continues to see year-on-year growth and we expect this to continue over the coming months.”

Overall in August, homeowner loans for house purchase accounted for 57% of gross lending, while remortgage activity accounted for 21%. Buy-to-let lending as a proportion of total gross lending remained at 17%, a consistent level since the beginning of the year, but up from 13% in the same period last year.

Shaun Church, director at broker Private Finance, said: “The swap rate outlook for the next 10 years is around 2%, which is a clear sign that markets do not expect a sharp interest hike in the foreseeable future. For borrowers, this means that low rates are here to be enjoyed for some time to come.

“In addition, mainstream lenders such as NatWest have returned to the interest-only market which is set to encourage further competition and product innovation among this group of lenders. This move back towards interest-only lending is one that should be welcomed, rather than feared, as these products can cater to a sizeable chunk of the market and can be hugely beneficial for the right borrower; assuming they are suitably underwritten in the first instance.”

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