By Daniel Hunter
Following the surge in activity in March, April saw a significant fall in house purchase lending, in particular to first-time buyers, according to new data from the Council of Mortgage Lenders (CML).
This was in line with expectations and was caused by the distorting effect of the March ending of the stamp duty concession.
The largest fall was to first-time buyers, with lending at around half the levels of the previous month.
The drop off in activity for first-time buyers was seen mainly among properties that would have qualified for the exemption in March so were subject to stamp duty in April. Purchases of properties valued between £125,000 and £250,000 fell by 70% in April compared to March.
In contrast those valued at £125,000 or below, so still exempt from stamp duty, fell by a more modest 11%, while first-time buyer purchases for properties over £250,000, so not eligible for the exemption in any case, fell by only 5%.
In total, 12,600 loans were advanced to first-time buyers, down by 48% compared to March and 12% compared to April 2011. By value, first-time buyers borrowed £1.5 billion, down 52% compared to March and 12% compared to April last year.
The change in the mix of properties bought had knock-on effects on first-time buyer loan characteristics. The average loan amount fell from £117,000 in March to £98,000 in April and first-time buyers typically borrowed 3.12 times their income, down from 3.34 in March. These changes are almost wholly because of the trend in April towards cheaper properties rather than a real improvement in affordability for first-time buyers.
"April's figures show the expected effect of the end of the stamp duty concession on UK mortgage lending. Given the economic uncertainty, any significant pick up in lending in the coming months seems unlikely," Paul Smee, director general of CML, commented.
"However, our recent research highlights that over 80% of people still aspire eventually to own their own homes, and long term demand clearly still exists."
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