Loans to first-time buyers reach five and a half year high

The Momentum UK Team 12 July 2013

The number of mortgage loans given to first-time buyers has hit the highest total since December 2007, according to the Council of Mortgage Lenders (CML).

25,000 people took out their first mortgage in May this year, which is a 42% increase on May 2012. The number of loans made to people moving home or remortgaging rose by 18.7% over same period, a further sign of recovery for the property market.

The CML believes that this increase can partly be attributed to the government’s Funding for Lending Scheme (FLS). Under FLS, banks can borrow money from the bank of England at lower rates, on the understanding that they then lend it to businesses and individuals.

Another government scheme that could be behind the figures is the Help to Buy scheme, which allows borrowers to take an equity loan from the government to help them buy a new home. This scheme, launched in April, means that first-time buyers only need to find a 5% deposit, and has therefore helped to boost lending.

Paul Smee, director general of CML, said:

"Both the borrowing appetite of first-time buyers, and the availability of attractive mortgages for them, have improved markedly since a year ago,"

But warned that the housing market is not out of the woods yet. He emphasised that it is “important that the supply of housing steps up, as increased housing supply is a crucial factor in ensuring that housing is affordable over the long term".

Figures from chartered surveyors e.surv also seem to suggest that Help to Buy has had an impact; the number of borrowers with deposits of less than 15% was up by 47% year on year in June, the highest level since financial crisis. Richard Sexton, director of e.surv, said that the first-time buyer market was “alive and kicking” again. However, he also warned that the market has not yet fully recovered:

"The improvement in high LTV lending is relative. It is still well short of pre-2008 levels, which is why there are still comparatively few first-time buyers. Homeownership remains a dream for the majority of young people, but it is a distant one for most of them."