Loans to first-time buyers down 10%

| December 9, 2011
Loans to first-time buyers down 10%

October was a difficult month for first-time buyers according to the latest figures from the Council of Mortgage Lenders (CML).

Ten per cent fewer home loans were offered to first-time buyers compared with September and the average deposit they had to find was a hefty 20 per cent.

In the current economic climate and with many prospective house purchasers living in expensive rental properties, finding this level of deposit is out of reach.

Just 16,400 first-time buyer loans were approved in October.

The total number of home loans approved for all groups fell 8 per cent compared with September, to 44,500.

On a year-on-year basis, home loans were down 5 per cent overall in October, and down 1 per cent for first time buyers.

The CML expects the number of first-time buyers seeking mortgages to increase early next year, as they rush to avoid having to pay stamp duty.

Until 25 March 2012 first-time buyers of residential property can apply for exemption from stamp duty on properties valued at £250,000 or less.

Paul Smee, CML director general, said: “Despite the fall in lending in October, it is possible that we will see signs of increased activity by first-time buyers in the early months of next year, as we approach the end of the government’s stamp duty concession at the end of March.”

The CML also delivered some good news for house purchasers with its figures showing that mortgages are at their most affordable level since 2004.

Although mortgage deposits remain high, monthly interest payments have shown a downward trend.

Mortgage interest accounted for 12 per cent of income in October, its lowest level since January 2004.

The government is trying to help first-time buyers struggling to find high deposits, through a proposed mortgage indemnity scheme.

This aims to encourage lenders to offer mortgages of up to 95% of a property’s value by guaranteeing that they will not lose money if the house-buyer defaults on their mortgage payments.

The government and participating house builders will contribute a certain percentage of a new-build property’s value into a loan guarantee fund through which lenders will be able to recover losses if a property falls into negative equity and is repossessed.

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