The Council of Mortgage Lenders (CML), which is comprised of banks, building societies and other lenders, released new figures on Monday that show lending to first-time buyers in the second quarter of 2013 was at its highest level since 2007.
According to the CML, which is responsible for 95% of all UK residential mortgage loans, 68,200 people bought their first home during the second quarter of this year. Coupled with an increase in lending to home movers, these latest figures indicate a significant rise in the total of loans made for house purchases. Overall, 83,500 loans were advanced to home movers during the period, a rise of 27% on the first quarter of 2013 and an increased of 4% compared to the second quarter of 2012.
During June this year, 25,300 loans were advanced to first-time buyers, a rise of 30% compared to the 19,400 loans advanced in June 2012. Also, the amount loaned to first-time buyers has steadily risen to an average loan size of £117,000 in June this year, an increase of 40% on June last year which has resulted in a total value of loans advanced to first-time buyers of £3.5bn. This increase is believed to be related to the recent growth in house prices; however increases in income and lower interest rates indicate that the affordability of these loans has not deteriorated because mortgage payments typically consumed just 19.3% of a first-time buyer’s income.
Also, the funding for lending scheme has improved funding conditions, which is said to have helped the continued downward movement of rates, with fixed rates dropping to an average of 3.40% on average, in comparison the peak of 4.25% seen in last August.
Mortgage loans to home movers have grown on a year-on-year and approximately 30,100 loans were advanced to home movers in June, a total value of £5.1bn. This was an increase of 6% over June 2012. Over the second quarter of this year, home movers were advanced 83,500, an increase of 27% on the first quarter and a rise of 4% compared to the second quarter in 2012.
Remortgages were slightly lower in June 2013, however the CML data showed that compared to the first quarter, growth in the first two months of the quarter resulted in an increase in the second quarter this year. Although restrained compared to historic levels, lending for remortgages continued to have a higher tendency than in 2012.
Director General of the Council of Mortgage Lenders, Paul Smee, stated: “First time buyers have become a strong driver in the growth of mortgage lending this year proving that market conditions are favourable for them. “With increased interest in home buyers ability to cope with the eventual rise of interest rates, it is particularly reassuring to see borrowers choosing to fix their payments and for longer in record numbers.”