The number of first-time buyers rose by 20% in March, according to the Council of Mortgage Lenders (CML).
This increase, as well as small rise in the number of home movers, contributed to a monthly jump in house purchase lending. Remortgage lending also increased compared to February but remained flat over the first quarter.
Lending via intermediaries
Intermediaries increased their market share in the first quarter among all borrower types. 52% of remortgage borrowers took out their loan via an intermediary, compared to 48% in the fourth quarter of 2012, while 48% of home movers and 55% of first-time buyers went via an intermediary (up from 45% and 54% respectively in the fourth quarter).
First-time buyers
A total of 19,100 loans (worth £2.4 billion) were advanced to first-time buyers in March, up from 15,900 loans in February but down on the 24,400 loans advanced in March last year. However, the CML noted that March 2012 marked the end of the first-time buyer stamp duty holiday and resulted in a significant jump in activity, making meaningful year-on-year comparisons difficult.
Despite the spike in March last year, first-time buyer lending activity over the first quarter of 2013 fell only marginally shy of activity in the first three months of 2012. Overall, 50,900 loans were advanced to first-time buyers in the first quarter of this year, compared to 51,200 loans in the first quarter of 2012.
While the loan-to-value ratio for first-time buyers remained at 80%, there has been a gradual increase in the proportion of first-time buyers taking out loans with a deposit of 10% or less. In the first quarter of the year 1 in 4 first-time buyers put down a deposit at 10% or less – up from 1 in 5 in the first quarter of last year. First-time buyers also typically borrowed a slightly larger amount in March than in February, both in absolute terms and relative to their income.
First-time buyers also continued to account for an increasing proportion of all house purchase loans – increasing to 45% in March from 43% in February.
Table 1: First-time buyers, lending and affordability
Number of loans | Value of loans £m | Average loan to value | Average income multiple | Proportion of income spent on interest payments | Proportion of income spent on capital and interest payments | |
March | 19,100 | 2,400 | 80% | 3.24 | 12.2% | 19.3% |
Change from | 20.1% | 20.0% | 80% | 3.21 | 12.5% | 19.5% |
Change from | -21.7% | -22.6% | 80% | 3.34 | 13.1% | 19.8% |
Home movers
Contributing to the rise in house purchase loans, lending to home movers increased in March. A total of 22,900 loans (worth £3.8 billion) were advanced to home movers in March, an increase of 11% from February.
On a quarterly basis, a total of 65,300 loans were advanced to home movers, down from 86,000 in the fourth quarter of 2012 and 71,600 loans in the first quarter of last year.
Table 2: Home movers, lending and affordability
Number of loans | Value of loans £m | Average loan to value | Average income multiple | Proportion of income spent on interest payments | Proportion of income spent on capital and interest payments | |
March | 22,900 | 3,800 | 70% | 2.89 | 9.3% | 18.4% |
Change from | 10.6% | 11.8% | 70% | 2.87 | 9.4% | 18.7% |
Change from | -17.3% | -13.6% | 70% | 2.91 | 9.9% | 19.2% |
House purchase lending
In line with the expected seasonal pattern, house purchase lending picked up in March compared to the first two months of the year.
A total of 42,000 house purchase loans were advanced in March (worth £6.2 billion) marking a 15% rise on February lending. As expected, house purchase lending in March was down (19%) on March 2012 but this was again due to distortions around the end of the stamp duty concession in March 2012.
On a quarterly basis, 116,200 loans were advanced for house purchase in the first quarter (worth £17.2 billion), a 21% fall compared to the fourth quarter of 2012 and down by 5% compared to the first quarter of last year.
Table 3: Loans for house purchase and remortgage
Number of house | Value of house | Number of | Value of remortgage | |
March | 42,000 | 6,200 | 23,300 | 3,100 |
Change from | 14.8% | 17.0% | 14.2% | 14.8% |
Change from | -19.2% | -17.3% | -18.5% | -13.9% |
Remortgage lending
Remortgage lending increased by 15% in March, but remains low compared to historical levels, and was 14% lower than March last year.
In the first quarter overall, £9 billion was advanced to borrowers remortgaging, a 10% fall compared to the fourth quarter of 2012 and down by 19% compared to the first quarter last year.
CML director general Paul Smee said: “First-time buyer activity in the first quarter was nearly at the same level as last year – when figures were buoyed up by the end of the stamp duty holiday. This suggests that the market continues to be favourable for those looking to buy their first home.
“More borrowers are taking out higher loan-to-value mortgages than any other time in the last four years – a sign that lenders are open for business, and that borrowers, even those without a large deposit, are increasingly able to get a foot on the property ladder.”
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), added: “Today’s figures suggest that March was a month of steady progress – not only with significantly more loans to first time buyers and homemovers, but also a monthly increase in overall house purchase and remortgage lending.
“To an extent it is no more than we would expect at this time of year, but the quarterly fall in house purchase volumes suggests that consistent growth is yet to emerge. However the figures indicate that first-time buyers can still find their way to a favourable deal without the added incentive of the Stamp Duty holiday.
“The figures also show lenders pre-empting Help To Buy by advancing more 90%+ loans to first-time buyers compared with last year. Even without the government acting as a guarantor, the market has moved to assist first-time buyers with smaller deposits.
“Understanding the range of deals and schemes now available for home buyers is a significant task, and advice from intermediaries is increasingly important for anyone searching out the most appropriate loan in the current market.”
