Mortgage lending to first-time buyers rises 45%

Published 12th Nov 2009

First-time buyers benefit from lower house prices and a temporary increase in the stamp duty threshold, but overall lending levels off


A third of first-time buyers did not pay stamp duty in September, benefitting from the government's temporary increase in the 0% threshold to £175,000, the Council of Mortgage Lenders (CML) said today.

Falls in house prices over the past 18 months have helped bring more properties below the threshold.

During September, 19,700 loans were granted for first-time buyers, 45% higher than in the same month the previous year and 5% higher than in August. Of those, 6,200 mortgages were used to buy properties costing between £125,000 (the original threshold) and the current £175,000 level. A further 7,800 first-time buyers (40%) bought properties below £125,000.

The government increased the threshold last September, and it is set to remain in place until the end of the year. Since its introduction about 132,500 buyers have avoided paying the tax, which kicks in at 1% of the purchase price at £175,000.

However, despite this saving, and falling house prices, the CML's figures show first-time buyers have needed to find more savings to get on the housing ladder as lenders have upped minimum deposits and tightened lending criteria. In September the average deposit put down by a new buyer was 25% of the property's value compared with 16% in September last year.

The overall number of mortgages for completed house purchases rose by 2% between August and September to 50,600. In the same month last year 35,000 mortgages were completed for home purchase.

The CML said this was the third month in a row in which there had been a year-on-year increase in lending for house purchases, following 25 consecutive months in which lending had been lower than a year earlier. The group's economist, Paul Samter, said: "The stamp duty concession has played a modest role in underpinning confidence in the housing market.

"As the end date for the stamp duty concession approaches we may see sustained levels of activity at the lower end of the market in a traditionally quiet time. But the corollary will be lower activity in early 2010 as transactions are 'bunched' in 2009."

He added: "Although the recent bounce-back in house purchase activity is holding up we remain some way below what might be called 'normal' levels of transactions."

The CML said the number of remortgages also increased between August and September, rising by 10% to 33,000. However, this marks a fall of 48% compared with September last year.

Source: ' Guardian '

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