FTBs race out of starting blocks for 2013

Robyn Hall

April 15, 2013

Activity in the first-time buyer sector was 17% stronger in February than in February last year and combined with January reached the largest number of first-time buyers in the first two months of the year since 2008.

CML director general Paul Smee said: “First-time buyers are continuing to take advantage of more favourable market conditions helping to drive the underlying trend for resilient house purchase lending.

“We hope that the new initiatives announced by the government in the 2013 Budget will further stimulate first-time buyer activity but also help those “second steppers” looking to move into a new or existing home.”

A total of 16,400 loans were advanced to first-time buyers in February up on 15,900 in January and 14,000 at the same time last year.

By value, loans to first-time buyers totalled £2bn, the same amount as the previous month, but 18% higher than in February 2012 (£1.7bn).

Chris Love, director of independent mortgage broker Mortgage Simplicity, said: “If proof were needed that the new Help to Buy scheme will find a receptive audience, this is it.

“Demand from first-time buyers is strong and they are finally living up to their billing as the engine of the property market.”

First-time buyers accounted for 43% of all house purchase loans in February. This was the sixth consecutive month that this indicator has been at or above 40% suggesting that market conditions continue to improve for first-time buyers.

Indicators of loan affordability also suggest that the market was marginally more favourable for first-time buyers in February. First-time buyers typically borrowed a smaller amount in February than in January, both in absolute terms and relative to their income. First-time buyers typically borrowed 3.19 x their income in February, down from 3.2 x in January, while the average LTV ratio remained at 80%.

This is likely to be associated with a shift towards the purchase of less expensive properties by first-time buyers, with a small increase in the proportion of properties bought for less than £125,000.

Ashley Brown, director of independent mortgage broker Moneysprite, added: “These figures are very encouraging and another step in the right direction albeit that first-time buyer numbers have been at ridiculously low levels since 2008, so the only way really was up.

“The Funding for Lending Scheme has certainly helped provide more competitive rates across the board although only in recent months have we started to see more deals at the higher loan to value end of the market.”

Peter Williams, executive director of IMLA, said: “Today’s figures from the CML give a rather mixed picture. On the positive side the number of first time buyers in February was not only higher than the previous month but was also 17.1% higher than this time last year suggesting such buyers are returning to the market which in turn will encourage others to think about moving.

“More negatively, the overall total number of loans at 37,900 was down on 38,200 recorded in January and this despite the Funding for Lending scheme. The number of home movers and remortgagers have both fallen in February so we are still not seeing a general recovery.

“However, the overall mood is more positive at present and it is important we see strong March figures to back this and give further momentum to the market. Today’s Item Club forecast is upbeat in terms of both prices and transactions on the back of continued government support. With prices still flat in most parts of the UK and low mortgage interest rates there are some grounds for optimism but clearly many would be buyers/movers are still in wait and see mode.”

Ben Thompson, MD Legal & General Mortgage Club, added: “Today’s figures illustrate a hardening of demand and the increase in lending is in large part due to the benefits brought by the Funding for Lending Scheme. Data from our latest Mortgage Mood Survey showed that about 70% of UK homeowners feel the current value of their property is ‘about right’ and this rational attitude is also stimulating market activity. As a result we are seeing a marked increase in FTB activity which should only continue to gather pace in the coming months.”

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