First-Time Buyer Activity Gains Ground in Q2
As hopes and fears over the UK’s residential property market continue to fluctuate, recent data show that first-time buyers enjoyed a resurgence in the second quarter of the year.
The Council of Mortgage Lenders (CML) has published data and analysis highlighting how first-timers have fared so far this year and the result have been surprisingly positive.
West Hampstead estate agency Paramount Properties welcomed the news of increased success for first-time buyers. “It’s been a difficult period for new home buyers to get onto the housing ladder, so to see evidence that more hard-working first-time buyers have been able to achieve that is good news for them and the housing market in general.”
The CML’s regulated mortgage survey showed that in June first-time buyers took out 34,300 mortgages, 24% more than in May. The value of those mortgages totalled £5.5 billion, representing a 28% increase from the previous month.
Data for the second quarter was equally upbeat with the total amount of mortgage borrowing by first-time buyers hitting £13.7bn, up 23% from the first quarter. And, the number of mortgage loans first-time buyers took out rose 23% to 87,100 loans from the first three months of the year.
“First-time buyers are continuing to drive house purchase lending, outperforming home movers for the third month running,” said CML director general Paul Smee. “More loans were advanced to them in June than at any time since August 2007.”
A number of developments supported first-time buyers, one of which was one of the Government’s housing schemes, specifically, the mortgage guarantee scheme. After being introduced in 2013, the scheme has helped close to 79,000 home buyers to-date and analysis shows that some 80% of that number were first-time buyers.
“It’s interesting to see a Government scheme successfully assisting a group in need,” said Assetgrove. “The additional benefit is that when the scheme ends at the end of the year, it’s unlikely to cause too many ripples as the housing market hasn’t become particularly dependent on it.”
The CML agrees with that assessment and is full of praise for this particular Government scheme which encouraged lenders to grant higher loan-to-value mortgages to Britons with a job who could afford the necessary repayments associated with the loans.
“The scheme played a key role in jump starting higher LTV lending at a time when confidence around house price growth – and the economy – was low,” the CML said in a report. “But, as time went on, it has also been important for lenders to operate outside of the scheme, which shows confidence has returned to the market.”
The mortgage guarantee scheme worked by providing a Government guarantee to lenders who offered 95% LTV mortgages. This left participating lenders liable for just 5% of the mortgage if the borrower were to default.
Other signs that confidence and normality returned to the UK’s housing market in the months and quarters leading to the end of June 2016 come in the form of further declines in arrears and repossessions figures.
The number of mortgages in arrears fell again in the second quarter of this year to the lowest level since records began in 1994. At the end of June there were 92,500 mortgages in arrears of at least 2.5% of the balance, down from 95,900 in the first quarter and 13.4% lower than a year ago.
Residential property repossession rates, meanwhile, fell to 1,900 between April and June down from 2,100 repossessions in the second quarter.
“The mortgage arrears and property repossessions data underscore that despite the high level of average prices, the UK’s residential property market was running well in the lead up to the referendum,” said Lawsons and Daughters. “That suggests it was well-placed to weather any problems or loss of confidence in the second half of the year.”