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First time buyer purchases rise strongly despite affordability limits

The number of first time buyers increased 20% for the month and are higher than a year ago even though higher house prices limit affordability.

Data from UK Finance show strong results for first time buyers as numbers rise 20.5% to 32,200 month-on-month and are 8.0% higher over the year.

Lending values are up 22.7% for the month to £5.4 billion which is 12.5% higher than a year ago even though affordability remains challenging with first time buyers borrowing 3.65 times household income.

Average mortgage loan size is £142,452 with a loan to value (LTV) slightly higher at 85.0% and homeowners proportion of repayments to their gross income is 17.3%.

There were 31,100 new home mover mortgages completed in the month, up 4.4% compared to last year and by value this was £6.6 billion of lending rising 4.8% year-on-year.

Strong remortgage buyer activity

The number of remortgage buyers increased to 36,000 rising 7.1% compared to the same month a year earlier with loans of £6.3 billion in the month increasing 6.8% year-on-year.

Jackie Bennett Director of Mortgages at UK Finance said, the mortgage market is seeing a pre-summer boost, driven by a rise in the number of first time buyers and strong remortgaging activity.

However, affordability remains a challenge for some prospective buyers and this is reflected by a gradual increase in loan to income multiples, says Ms Bennett.

For first time buyers the government Help to Buy scheme can make it easier to buy offering an interest free loan equal to 20% of the property value available on new build properties.

You need to find a small 5% deposit and the remaining 75% is provided by a mortgage from a lender for properties valued up to £600,000.

If you live in London the equity loan is 40% so you with your 5% deposit you only need to secure a mortgage with a LTV of 55% of the property value costing less than £600,000.

Buy-to-let investors constrained

The buy-to-let market for new purchases has been constrained following the change in stamp duty land tax introduced by the government in April 2016.

If you invest in a buy-to-let property or purchase a second home, you must pay an additional 3% in tax and the number of new purchases are about 10% lower than this time a year ago.

In contract 14,600 buy-to-let landlords have remortgaged their properties in the last month, some 15.0% more than this time last year and by value this was £2.3 billion of lending rising 21.0% year-on-year.

It is also particularly encouraging to see an increase in home movers, after a period of relative sluggishness in this important segment of the market, said Ms Bennett.

For older homeowners there has been a significant increase in new lifetime mortgage activity with equity release buyers accessing wealth to help maintain their standard of living or even buy a more expensive home.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to repay an interest only mortgage or gift to a family member or friend.

Learn more by using the property value tracker chart, mortgage costs calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.

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    Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks, please ask for a personalised illustration. Equity Release may affect your entitlement to means tested state benefits and will impact on the size of your estate. For Equity Release London City Mortgages charge a fixed fee upon completion of £695. For Mortgages a fixed fee is charged on application. Typically this is from £295 up to £495 for the services selected.


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