First-time buyer activity rose on a monthly and yearly basis in February, figures from the Council of Mortgage Lenders show.
In February there were 24,200 loans for those on the first rung of the housing ladder, up 7% from January and 11% year-on-year.
Paul Smee, director general of the CML, said: “Seasonal factors traditionally keep the market quieter in winter months, but 2017 began relatively strong on the house purchase side.
“Borrowers took out more loans to purchase a home in the first two months of 2017 than any year since 2007.
“This is down to strong first-time buyer activity which has consistently matched home mover borrowing over the past six months, a trend not seen in the UK for 20 years.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, was encouraged by the results.
He said: “This underlines what we are finding in our offices – that first-time buyers are taking advantage of a level playing field now that so many buy-to-let investors are choosing not to add to their portfolios but rather, are staying put and even selling in some cases.
“First-time buyers are the lifeblood of the market – we need to support them even more to ensure activity is maintained over what is bound to be a tricky period for buyers and sellers over the next few months.”
The buy-to-let market appeared to have a sluggish February however, with the number of loans decreasing by 26% year-on-year.
This can be attributed to the crackdown on the sector in the form of the Prudential Regulation Authority’s stress test and the reduction in mortgage tax relief, though the figures are also skewed by the rush to buy properties before the 3% stamp duty surcharge came into force in April last year.
Steve Olejnik, chief operating officer of buy-to-let broker Mortgages for Business, said: “In reality, the buy-to-let market has weathered challenges like the EU referendum and the PRA’s changes relatively well, and the number of new loans remained stable between January and February.
“We believe that a sustainable level of buy to let lending is around 15% of overall mortgage lending, and we are currently seeing the market rebalance towards this, with lending to homebuyers continuing to grow from month to month.
“Successive policy changes have been a key driving force behind this fall in buy to let’s share.
“Buy-to-let lending is likely to be more subdued this year than it was in 2016, but it still remains a good proposition for investment, particularly compared to more volatile asset classes like bonds and equities.”
Nick Leeming, chairman of estate and letting agents Jackson-Stops & Staff, said: “Could it be that the brakes applied to buy-to-let investors in April of last year is finally resulting in more stock being available for these first timers?
“Despite macro-political and economic uncertainty, the UK continues to be a nation of aspiring homeowners.”
But Steve Bolton, founder of property investment company Platinum Property Partners, doesn’t expect first-time buyers to prosper from the buy-to-let market’s despair for long.
He said: “Buy-to-let mortgage lending is being driven primarily by remortgage activity.
“This suggests that while landlords are taking advantage of the current ultra-low interest rate environment by swapping to a new deal to reduce their mortgage costs, few are expanding their portfolios and investing in new properties.
“This comes as no surprise, given the government has actively dissuaded investment in the sector by introducing the stamp duty surcharge and recent [reduction in mortgage tax relief].
“By preventing landlords from offsetting their finance costs when calculating their tax bill, many investors are now facing the prospect of greatly reduced profits, or none at all.
“To stay in business, they will have to either increase rents, sell properties or leave the sector altogether.”
He added: “The result is a rapidly shrinking buy-to-let mortgage market. In the long-term, this could also have a negative impact on first-time buyer lending activity: fewer rental properties and higher rents will make renting more expensive for tenants.
“It will therefore become even harder to save for a deposit and get on the property ladder.
“Given this is the exact opposite of the government’s supposed intention of introducing this tax change, the policy requires a drastic rethink, and should ultimately be removed altogether.”