UK lending to first-time buyer rises at slower pace

Photo credit:   Boyce Duprey

First-time buyers took out 24,500 loans in April, up only slightly by 1 per cent compared to March but 37 per cent more than in April 2013. The total value of these loans was £3.5bn, which was up 3 per cent on March and 52 per cent on April last year.

First-time buyer affordability worsened fractionally, with first-time buyers typically borrowing 3.42 times their gross income, compared to 3.41 in March. The typical loan size for first-time buyers was £121,500 in April, up from £118,750 in March and represents the highest monthly average advance for first-time buyers on record. In parallel to this, the typical income of a first-time buyer household increased to £37,000, up from £35,704 in March, which was also the highest average income on record.

The relatively low level of interest rates means borrowers’ payment burden remains relatively low at 19.4 per cent of gross income being spent to cover capital and interest payments, up from 19.2 per cent in March and 19.1 per cent in April 2013.

Total number of loans for home-owner house purchase (first-time buyers and home movers) increased month-on-month by 6 per cent and 11 per cent by value on March, with year-on-year growth in number of loans up 33 per cent and 47 per cent by value.

Total number of loans for remortgage in April was up 6 per cent and 11 per cent by value compared to March.

Paul Smee, director general of the CML, commented:  “First-time buyers and home movers continue to be key drivers in the growth of the market and, despite fears that MMR preparations may hinder this momentum, we have seen a continued year-on-year upward trend every month in 2014. The UK picture continues to mask a disparate set of varied local conditions, but overall we expect lending levels to continue to build on the foundation of growth we have seen over the past 12 months.”

Total number of buy-to-let loans declined slightly month-on-month down 1 per cent in April but the value remained unchanged. Compared to April 2013, there was a 43 per cent increase in number of loans and a 57 per cent increase in overall value.

Stuart Law, CEO of Assetz, comments: “[Buy-to-let] investors are increasingly heading for hotspots away from London, and in particular Northern cities where employment is strong, in search of higher yields are greater and long term capital appreciation.

“However, contrary to some claims, first-time buyers are not being stymied by investors with the volume of loans to these aspiring homeowners up 37 per cent year on year. A word of warning: new built stock is actually running low at the same time that our investor appetite for off-plan is returning nationwide. Recent renewed efforts to improve the planning process and potential release of brownfield land announced by the government are welcomed but let’s see some quick action and buy-in here from local authorities; rhetoric alone won’t deliver supply.”