First-time buyers fall to lowest level since 2007

Published 16th Jun 2010

Mortgage lending for house purchases fell by 9% in April, with the number of loans for first-time buyers falling by 17%, CML figures show


First-time buyers fall to lowest level since 2007, according to the Council of Mortgage Lenders The number of loans to first-time buyers fell to 17% in April, according to the CML. Photograph: Peter Byrne/PA

First-time buyers in April made up the lowest proportion of total house purchasers since September 2007, according to figures released by the Council of Mortgage Lenders (CML).

The CML said this morning that the 40,000 loans for house purchase in April was 9% down on March, while the number of loans for first-time buyers fell 17% to 14,300 following strong lending figures in March.

However, the number of loans to first-time buyers increased by 8% in April compared to the same month in 2009, while the value of loans increased by 21%.

Loans to home movers fell 5% to 26,100, while remortgaging numbers were down 16% to 24,000. The CML said that with interest rates expected to remain low in the immediate future, and lending criteria remaining tight, remortgaging would likely remain muted.

It added that although there had been an increase in the number of higher loan-to-value products available, this had not yet translated into a sustained increase in loans to borrowers with lower deposits. The tentative signs of easing experienced in March returned to previous levels in April, with the typical first-time buyer borrowing 75% and the typical home mover 67% of their property's value.

Michael Coogan, director general of the CML, said: "Easter traditionally causes a dampening of lending levels and this year was no exception. First-time buyers were particularly affected, perhaps because of the alteration to stamp duty, and in anticipation of the changes arising from the economic and political uncertainty of recent months.

"Lending for house purchase still looks modestly positive compared to 2009. But there remain a number of significant risks to this – in particular the potential for increased public sector unemployment arising from the government's debt reduction programme, and higher taxation feeding into levels of disposable income."

A further indication that the housing market is slowing came from the Communities and Local Government department, which reported that the month-on-month rise in house prices fell to 0.4% in April from 0.7% in March.

There had earlier been a fall of 0.1% in February, which was the first monthly decline since April last year. Thus, house prices rose by just 0.9% in the three months to the end of April compared with an increase of 4.8% in the three months to the end of January.

However, the year-on-year increase in house prices actually climbed to 10.1% in April from 9.7% in March.

Howard Archer, chief UK economist for analysts IHS Global Insight, said: "Housing market activity is currently muted and below the levels seen in late-2009, the economic fundamentals are still far from robust for the housing market, a fiscal squeeze is looming, credit conditions are tight, and house price/earnings ratios have moved back up from their 2009 lows and are above long-term norms.

"There are also growing concerns that the Bank of England will have to raise interest rates before the end of the year due to higher-than-expected inflation.

"On balance, we believe that house prices are likely to be erratic over the coming months and at best will make very modest gains over the rest of the year. Indeed, we would not be surprised if they were only flat overall through the rest of 2010."

Source: ' Guardian '

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