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First-time buyers lending at highest level since 2007

Published: 12 August 2013

Lending to first-time buyers has hit its largest quarterly total since 2007 with 68,200 purchasing their first home in the second quarter of 2013, according to new figures released by the CML today.

This increase, along with growth in lending to home movers, has resulted in a jump in total house purchase lending. Remortgage lending dipped back in June compared to May, although continues to trend above levels earlier this year. 

First-time buyers

Our data shows that 25,300 loans were advanced to first-time buyers in June, a 30% increase on the 19,400 loans advanced in June last year. Following the strength in first-time buyer activity in May and June, quarterly lending to first-time buyers was at its highest since 2007.

First-time buyers continued to increase the amount they borrowed – with an average loan size of £117,000 in June up from £112,500 in May. As a result of this there has been a stronger growth in the value of loans advanced to first-time buyers which totaled £3.5bn – an increase of  9% in value compared to May and 40% on June last year.

This is likely to be associated with the growth in house prices in recent months - in June 34% bought a home less than £125k, down from 37% in May.

While first-time buyers borrowed more in June, an increase in income, along with falling interest rates mean that there has been no deterioration in the affordability of these loans as typical first-time buyers mortgage payments consumed 19.3% of first-time buyers' income – unchanged from May.   

We have previously noted a small increase in the average LTV ratio for loans advanced to first-time buyers – the latest figures show this to have dropped back to 80%. However the average for the second quarter, which will be less affected by monthly fluctuations, has increased slightly – up to 81% from 80% in previous quarters.

First-time buyers accounted for 46% of all house purchase loans in June, which was up from 44% in May and considerably higher than the 38% seen on average since 2007.

Table 1: 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 Proportion of income spent on capital and interest payments
25,300 3,500 80% 3.33 12.0% 19.3%
Change from
May 2013
4.1% 9.4% 82% 3.29 12.1% 19.5%
Change from
June 2012
30.4% 40.0% 80% 3.29 13.5% 19.9%

Home movers

Lending to home movers continued to grow on a year-on-year basis, albeit at a slower rate than for first-time buyers. Some 30,100 loans were advanced to home movers in June, a 6% increase compared to June last year. The value of these loans totaled £5.1bn.

For the second quarter of the year overall, 83,500 loans were advanced to home movers which was an increase of 27% on the first quarter of 2013 and up 4% on the second quarter last year.

Table 2: 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 Proportion of income spent on capital and interest payments
30,100 5,100 70% 2.91 9.0% 18.2%
Change from
May 2013
-1.6% 2.0% 70% 2.87 9.0% 18.2%
Change from
June 2012
5.6% 8.5% 70% 2.91 10.4% 19.4%

House purchase lending

The house purchase sector continued to support overall gross lending in June and the second quarter as a whole.

A total of 151,600 loans was advanced for house purchase in the second quarter, up by 30% compared to the first quarter of 2013 and 17% compared to the same period last year. In June, £8.5bn worth of loans was advanced which was an increase of 16% compared to June last year.

Table 3: 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
55,400 8,500 26,800 3,700
Change from
May 2013
1.1% 3.7% -14.6% -11.9%
Change from
June 2012
15.7% 18.1% 13.6% 19.4%

Remortgage lending

While remortgage lending dipped in June, growth in the first two months of the quarter resulted in an increase in the second quarter compared to quarter one. Remortgage lending continued to trend above last year’s levels (based on both the second quarter and the June total), although remains subdued compared to historic levels. 

Interest rates

Recent falls in rates have contributed to a record take-up of fixed rate mortgages in June which represents 86% of all mortgages. This is the highest level of fixed rate mortgage uptake at any point for at least 20 years.

Funding conditions have shown improvement, in particular the funding for lending scheme helped stem the upwards pressure on rates seen through the first half of 2012. Rates continued to show a downward movement in June with fixed rates falling to 3.40% on average. This is well below the 4.25% recent peak last August and somewhat below the previous recent low of 3.69% at the end of 2011.

Paul Smee, director general of the Council of Mortgage Lenders, commented:

“First time buyers have become a strong driver in the growth of mortgage lending this year proving that market conditions are favourable for them.  

"With increased interest in home buyers ability to cope with the eventual rise of interest rates, it is particularly reassuring to see borrowers choosing to fix their payments and for longer in record numbers." 

Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.3 million mortgages in the UK, with loans worth over £1.2 trillion.

2. Source: CML Regulated Mortgage Survey

3. The Council of Mortgage Lenders does not publish statistics for mortgage approvals. The data in our monthly Regulated Mortgage Survey and gross lending press releases relate to mortgage advances only. A mortgage approval is the firm offer to a customer of a specific amount of credit secured against a particular property. A mortgage advance is the total amount of loan actually provided to the buyer, by the lender.

4. The July 2013 data will be released on Monday 12 September 2013.

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