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First-time buyer activity at highest level for 10 months


Published: 10 August 2011 | Author: Bernard Clarke

Borrowing activity by first-time buyers in June was at its highest for 10 months, with 18,100 loans, worth £2.2 billion, CML data showed. The number of loans was 24% higher (29% higher by value) than in the preceding month, but 8% lower in volume and by value than in June 2010.

People moving home took out 28,600 loans, worth £4.6 billion, in June – up from 23,800, worth £3.7 billion, in May, but down from 32,800, worth £5.3 billion, in June 2010.

Overall, there were 46,700 loans for house purchase, worth £6.7 billion, in June, up 22% in volume and value from May, but 11% lower in number (13% lower by value) than in June 2010.

Remortgaging was unchanged in June, with 30,700 loans, worth £3.8 billion. Unlike lending for house purchase, remortgaging was higher (10% in volume and 9% by value) than in June 2010.

More encouraging lending volumes may persist for a while, with recent increases in Bank of England mortgage approval figures suggesting that more completions are expected in July. While there are clearly financial uncertainties ahead, it is encouraging to see more house-buyers emerging at the start of the summer.

There was little change in lending criteria in June. First-time buyers paid an average deposit of 20% of the property’s value, unchanged since February. Deposits for first-time buyers are lower than the high of 25% seen throughout 2009, but higher than the historic norm of 10%. Movers, on average, took out a mortgage for 70% of the property’s value, a figure that has not changed significantly in recent years.

Fixed-rate borrowing edged up in the second quarter of 2011, with 63% opting for this type of mortgage, compared to 60% in the first quarter and 46% in the second quarter of 2010. While expectations of a rise in interest rates have receded, uncertainty over when the first rate rise will come may have swayed borrowers to opt for a fixed rate.