The Daily Telegraph: First-time buyers hit five-year high as house prices rise by 7,000
Tue 12 Feb 2013
More first-time buyers got a foot on property ladder last year than at any time since the credit crisis began, Council of Mortgage Lenders (CML) figures show.
Generation rent ? or that portion of increasingly middle-aged people frozen out of homeownership by the mortgage famine ? is getting fed up with filling their buy-to-let landlords pockets and taking the plunge into property.
A total of 216,200 first-time buyers became homeowners in 2012, the first time the annual total has exceeded 200,000 since 2007, and a year-on-year rise of 12pc on 2011 when 193,000 loans were advanced.
Paul Smee, director general of the CML, said: First-time buyers, in particular, have benefitted from the effects of better funding conditions and the Funding for Lending Scheme (FLS), with the number of new people moving into home-ownership in 2012 reaching the highest level for five years. This, along with other factors, confirms that lenders really are open for business.
He added that there was also a modest increase in lending at higher loan-to-value (LTV) ratios in the last quarter. While the average LTV stayed at 80pc, where it has been for two years, one in five first-time buyers obtained 90pc LTV mortgages or more and one in 40 borrowed 95pc of purchase price. Fewer than one in 100 did so a year earlier.
But David Newnes, a director of LSL Property Services ? owner of? Your Move and Reeds Rains estate agents pointed out: Although the range of high LTV deals has improved, banks are still incredibly cautious about their level of lending in this bracket and it is still tough for most buyers to secure a mortgage without more than a 15pc deposit.
This leaves thousands of buyers reliant on the Bank of Mum and Dad to secure their first home. However, the FLS is certainly helping, with lenders telling us they expect? total mortgage advances to rise from 145bn last year to 156bn this year.
He pointed out other signs that the market may be recovering. LSL reckons the average house price increased by 7,000 or 3.1pc last year to 227,500 and that the age of first-time buyers fell to 28 ? nearly a decade? lower than recent estimates elsewhere. Peter Rollings, chief executive of estate agent Marsh & Parsons, was also optimistic: The FLS has rekindled the mortgage market, and the freeze on lending is starting to thaw. This is fanning the flames of the first-time buyer market. Not only have rates plummeted, but an increasing number of new buyers are able to access cheaper finance at higher LTVs.
Nearly one fifth more first time buyers were able to get onto the property ladder in December compared to two years ago and if this trend persists, it will help unfreeze property chains, allowing moves higher up the market. Similarly, Richard Sexton, director of e.surv chartered surveyors, commented: This is the most encouraging sign for the mortgage market since the financial crisis.
After an inauspicious start, the FLS has come good and flooded lenders balance sheets with cheaper funds, encouraging them to reduce mortgage rates to record lows and roll out a much wider range of mortgages for high loan-to-value borrowers. It is helping clear the logjam in the first-time buyer market.
But one swallow does not a summer make and one years improvement in mortgage advances will not get the housing market or house prices back to where they were when the credit crisis began.
Government intervention in the form of the FLS is clearly helping to ease the mortgage famine, helping thousands of tenants escape rental accommodation and begin to accumulate capital through homeownership, often for no extra monthly outlay. But the FLS remains deeply unpopular among savers, because it depresses returns on deposits. It remains to be seen whether Government stimulus for lenders and borrowers can be maintained in the face of rising criticism from savers ? or whether homebuyers today are picking up bargains or throwing good money after bad.
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