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First-time buyers make a bright start to the year


Published: 19 March 2013 | Author: Bernard Clarke

House purchase lending has reached its highest January total for five years, with first-time buyer activity particularly strong. A total of 15,900 loans, worth £2 billion, were advanced to first-time buyers, up by 24% on January last year and the highest total for the first month of the year since 2008.

For the third month in a row, first-time buyer activity accounted for 42% of all house purchase loans – the highest proportion since we began publishing monthly data in 2002 (apart from a blip in March last year when the end of a stamp duty concession for first-time buyers artificially inflated numbers). On a quarterly basis, the last time the proportion of first-time buyers was higher than 42% was in 2001.

A slight improvement in affordability for first-time buyers – both in absolute terms and relative to income – pointed towards more favourable conditions. First-time buyers typically borrowed 3.2 times their income in January, down from 3.28 times income in December and 3.23 in January last year.

There was a slight shift towards cheaper properties for first-time buyers, with a small increase in the proportion of homes bought for less than £125,000. The average loan-to-value ratio remained at 80% in January – essentially unchanged for more than two years.

Overall, house purchase lending in January was 11% higher than a year earlier. A total of 38,300 loans were advanced for house purchase, down from 45,900 in December but an increase on the 34,600 advanced in January last year. By value, house purchase lending totalled £5.7 billion, compared to £6.9 billion in December and £5.2 billion in January last year.

Borrowing by movers was up year-on-year, but not as strongly as for first-time buyers. A total of 22,300 loans, worth £3.7 billion, were advanced to movers, 3% more than in January last year but 16% fewer than in December. Mirroring the trend in first-time buyer activity, the number of loans advanced to movers was also the highest January total since 2008.

Remortgaging remained subdued, but appears to have stabilised after falling during most of 2012. Lenders advanced £3 billion for remortgaging in January, an increase of 3% on December but 23% lower than the £3.9 billion advanced 12 months earlier.

Seasonal factors can be a major factor in lending volumes for the first month of the year, but the highest January total for five years confirms that mortgage finance is available and that lenders really are open for business. As the year progresses, we expect to see an increase in the numbers stepping into home-ownership or moving house in line with their needs.