By Daniel Hunter
Lending to first-time buyers has hit its largest quarterly total since 2007 with 68,200 purchasing their first home in the second quarter of 2013, according to new figures released by the Council of Mortgage Lenders (CML) today (Monday).
This increase, along with growth in lending to home movers, has resulted in a jump in total house purchase lending. Remortgage lending dipped back in June compared to May, although continues to trend above levels earlier this year.
The data shows that 25,300 loans were advanced to first-time buyers in June, a 30% increase on the 19,400 loans advanced in June last year. Following the strength in first-time buyer activity in May and June, quarterly lending to first-time buyers was at its highest since 2007.
First-time buyers continued to increase the amount they borrowed — with an average loan size of £117,000 in June up from £112,500 in May. As a result of this there has been a stronger growth in the value of loans advanced to first-time buyers which totaled £3.5bn — an increase of 9% in value compared to May and 40% on June last year.
This is likely to be associated with the growth in house prices in recent months - in June 34% bought a home less than £125k, down from 37% in May.
While first-time buyers borrowed more in June, an increase in income, along with falling interest rates mean that there has been no deterioration in the affordability of these loans as typical first-time buyers mortgage payments consumed 19.3% of first-time buyers' income — unchanged from May.
We have previously noted a small increase in the average LTV ratio for loans advanced to first-time buyers — the latest figures show this to have dropped back to 80%. However the average for the second quarter, which will be less affected by monthly fluctuations, has increased slightly — up to 81% from 80% in previous quarters.
First-time buyers accounted for 46% of all house purchase loans in June, which was up from 44% in May and considerably higher than the 38% seen on average since 2007.
“First time buyers have become a strong driver in the growth of mortgage lending this year proving that market conditions are favourable for them," Paul Smee, director general of the Council of Mortgage Lenders, commented.
"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."
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