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Increase in first-time buyers

The number of UK first-time buyers purchasing their first home in any one year reached its highest total in five years in 2012. According to the latest figures from the Council of Mortgage Lenders (CML), 216,200 first-time buyers took the plunge in 2012.

The CML says that this is the first time there have been over 200,000 first-time buyers in a year since 2007.

Loans to first-time buyers

Over 2012 as a whole, 216,200 first-time buyers took out loans – up 12% on 2011, when 193,000 loans were advanced.

Looking at the last quarter of 2012, 60,500 loans were advanced to first-time buyers (amounting to £7.6 billion). This was up 8% on the third quarter and up 14% on the fourth quarter of 2011. December, however, showed a fall of 12% when compared to November, with only 19.100 loans taken out by first-time buyers. Nevertheless, the figure is still up 3% on December 2011. 

Better funding conditions for first-time buyers

According to CML director general Paul Smee, the December dip masks a more positive underlying trend, with house purchase activity on the up.

“First-time buyers, in particular, have benefitted from the effects of better funding conditions and the Funding for Lending scheme, with the number of new people moving into home-ownership in 2012 reaching the highest level for five years,” he said. “This, along with other factors, confirms that lenders really are open for business.”

Loan-to-value ratio

According to the CML, there has also been a slight increase in lending at higher loan-to-value ratios in the last quarter. While the average ratio stayed static at 80%, as it has done over the last few years, the number of first-time buyers taking out a 95% mortgage in 2012 increased to 1 in 40, compared to less than 1 in a 100 in 2011.

Around 1 in 5 borrowed 90% or more.

Help from the Scottish Government

Scottish first-time buyer numbers are likely to be further increased when a recently announced £20 million funding boost comes into effect. This will help around 500 people on low to moderate incomes purchase their first home through shared equity schemes. 

Successful applicants will be able to buy their property by paying a majority share in it, with the Scottish Government paying the outstanding balance, under an agreement which it will enter into with the buyer.