Lending to first time buyers at it’s highest in 5 years

Lending to first time buyers at it's highest in 5 years

The fact that the UK economy narrowly avoided triple-dip recession isn’t the only good financial news around. Newly released figures from the Council of Mortgage Lenders show that the number of first time buyers grew by 3 per cent in February.

When compared with the figures from February 2012, the number of first time buyers was up by 17 per cent. When this figure is combined with the numbers from January, it shows there has been more activity in the first time buyer sector during the first two months of the year than at any time since 2008.

The figures are seen by experts as a clear sign that conditions in the house market are starting to improve for the first time buyer. Around 43 per cent of all home purchase loans issued during February were made to those getting on the housing ladder for the very first time. On average, first time buyers borrowed 3.19 times their income and put down an average deposit of 80 per cent.

Hopes are high that the upward trend will continue as the result of the government’s new Help to Buy Equity Loan Scheme. Introduced in April 1 2013, the scheme aims to help buyers who would like to own a newbuild home but are unable to afford the repayments on a mortgage.

Under the scheme, buyers can obtain a loan worth up to 20 per cent of the value of the home on an interest-free basis for up to five years. Unlike the FirstBuy scheme which Help to Buy replaces, the loans are available to all buyers, not just those purchasing their first home.

The FirstBuy scheme aimed to help around 10,000 buyers and had a total budget of £500 million. The Help to Buy scheme has a much broader scope and, thanks to funding of £3.5 billion, aims to help up to 74,000 buyers.

Having only just started, it is too early to assess what impact the scheme has. However, considering that it has the ability to stimulate the market for those looking to upgrade, as well as those looking to buy their first home, it is highly likely that the February growth is set to continue for some time.

About the Author