Loans to first-time home buyers fall by 27%

17th March 2015

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Lending to first-time buyers dropped by 27% from December to January, with only 19,000 loans granted with a total value of £2.8 billion.

The figure was 14% down on the previous January.  Lending to home movers dropped by 24% from December  and 17% year-on year. In January there were 22,400 loans to home movers with a total value of £4.2bn.

Remortgage lending increased month-on-month with 25,600 loans advanced – up 15% on December but 12% down on January 2014. The value of these loans (£4.1 billion) also increased month-on-month by 21% but was down 5% year-on-year compared to January 2014.

There were 18,200 buy-to-let loans in January – up 6% on the previous month and up 12% on the same period in 2014. These loans came to £2.5bn in value, unchanged compared to December but up 14% on January 2014.

Paul Smee, director general of the CML, commented:  “The traditional beginning of year seasonal lull in lending is slightly more prominent in house purchase lending than in previous years, especially in comparison to the particularly strong levels at the start of 2014. Affordability constraints remain a factor for would-be borrowers, but we are still projecting lending to pick up over the next few months.

“Increases month-on-month in remortgaging, both for home owners and in the buy-to-let market, are welcome given the recent static nature of remortgage activity. Interest rates are looking unlikely to go up in the very near future and the greater availability of good mortgage rates has probably motivated people to look at a change.”

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “After an extended period of sluggish activity, the remortgage market picked up considerably in January as homeowners rushed to make the most of the record low rate deals currently available on the market.

“With recent warnings suggesting that lenders are beginning to react to rising swap rates by pulling historic low deals, it’s likely there will be a boost in remortgaging in the coming months as homeowners seek to lock into low rates before they hit the bottom of the curve.

Murphy added: “Affordability conditions have also improved for first-time buyers, with CML data showing that the proportion of income that first-time buyers spend on mortgage payments has fallen this month, making life easier for younger borrowers with less disposable income. The average loan-to-value for first-time borrowers has also risen to 83%, reducing the amount needed for a deposit.

“However, there has also been a significant fall in lending to first-time buyers.  January saw a 27% decrease in the volume of lending to these customers, which now lies at its lowest point for 21 months in terms of both volume and value. Although the Help to Buy scheme is propping up higher LTV lending options, more needs to be done to ensure first-time buyers are not barred from the housing market, particularly once the scheme has ended.”

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