Lowest share of house purchase market for first-time buyers since 2007

15 June 2010

First-time buyers made up the lowest proportion of house purchase loans since September 2007, according to new data released today by the Council of Mortgage Lenders. They accounted for 35% of all house purchase mortgages, down from 39% in March and 38% in April 2009. The low share of the market shows that getting a mortgage remains problematic for first-time buyers who tend not to have a substantial deposit.

Overall, there were 40,000 loans advanced for house purchase in April worth £5.7 billion, down from 45,000 (worth £6.3 billion) in March but up from 35,000 (worth £4.5 billion) in April 2009. April's seasonal dip was expected due to the Easter break and the underlying trend is of a gradual recovery in house purchase lending.

Table 1: Loans for house purchase and remortgage

	Number of house purchase loans	Value of house purchase loans £m	Number of remortgage loans	Value of remortgage loans, £m
April 2010	40,000	5,700	24,000	2,900
Change from March 2010	-9%	-10%	-16%	-17%
Change from April 2009	+15%	+27%	-26%	-26%

The dip was more strongly felt in remortgage activity, where the trend remains firmly down in contrast to lending for house purchase. There were 24,000 remortgage loans worth £2.9 billion, down 16% (17% in value) from March and 26% lower (both in volume and value) than a year ago. With expectations for rates to remain low for the immediate future, and lending criteria still tight, remortgaging is likely to remain muted.

Table 2: First-time buyers, lending and affordability

	Number of loans	Value of loans £m	Average loan to value	Average income multiple	Proportion of income spent on interest payments
April 2010	14,300	1,700	75%	3.16	13.5%
Change from March 2010	-17%	-15%	76%	3.22	13.4%
Change from April 2009	+8%	+21%	75%	3.04	15%

Table 3: Home movers, lending and affordability

	Number of loans	Value of loans £m	Average loan to value	Average income multiple	Proportion of income spent on interest payments
April 2010	26,100	4,000	67%	2.84	9.6%
Change from March 2010	-5%	-7%	68%	2.86	9.7%
Change from April 2009	+19%	+29%	69%	2.70	11.4%

Although there has been some increase this year in the number of higher loan-to-value products available, this has not yet translated into a sustained increase in loans to borrowers with lower deposits. The tentative signs of easing experienced in March returned to their previous levels in April, with the typical first-time buyer borrowing 75% and the typical home mover 67% of their property's value.

Commenting on today's data, Michael Coogan, director general of the CML, said:

"Easter traditionally causes a dampening of lending levels and this year was no exception. First-time buyers were particularly affected, perhaps because of the alteration to stamp duty, and in anticipation of the changes arising from the economic and political uncertainty of recent months.

"Lending for house purchase still looks modestly positive compared to 2009. But there remain a number of significant risks to this – in particular the potential for increased public sector unemployment arising from the government’s debt reduction programme, and higher taxation feeding into levels of disposable income."

Notes:

Source: CML/Banksearch.

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