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More loans to first-time buyers

Lending to first-time buyers increased in October, according to new figures from the Council of Mortgage Lenders (CML). The statistics build on earlier Scottish data, revealing that in the third quarter of 2012, the highest number of loans was advanced to first-time buyers in nearly three years.

First-time buyers

After a slow September, the number of loans advanced to first-time buyers in October returned to levels similar to those seen over the summer, says the CML. 

In all, 20,000 loans were advanced – up 14% on September and up by 19% compared to this time last year. These were worth £2.5 billion, up on the £2.2 billion advanced in September and the £2.1 billion advanced last October.

Lending details

Looking at the statistics in detail, the CML report reveals that in October:
first-time buyers continued to favour properties priced between £125,000 and £250,000 in October, with 49% buying properties in this band;

They spent 20% of their income on mortgage payments, which is slightly better than in 2007, when first-time buyers typically spent 25% of their income on capital and interest payments;

In all, loans to first-time buyers accounted for 40% of all house purchase loans for the second consecutive month; and
Most first-time buyers have a loan-to-value (LTV) ratio of 80% – a figure that has pretty much remained the same over the last two years.

First-time buyers in Scotland

The positive statistics follow hard on the heels of an earlier CML report, published in November, revealing that the number of loans advanced to first-time buyers in Scotland had increased again between July and September, marking the highest number of first-time buyers in nearly three years.

According to the report, there were 5,100 loans advanced to Scottish first-time buyers in the third quarter, a 6% increase compared to the second quarter and up by 9% on the same period last year.

Lending to home movers also up

Although not matching the same rate of growth as first-time buyers, lending to home movers also increased in October. A total of 29,400 loans were advanced to home movers, worth £4.8 billion, a rise of 13% compared to September and up by 5% on the same period last year.

However, after three consecutive months at 69%, the LTV ratio for home movers ticked back up to 70% in October. “More positive figures in October, after a slow September, suggest that the underlying trend in house purchase lending of modest year-on-year growth will continue,” said CML director general Paul Smee. “If the incremental improvements in house purchase lending that we are currently seeing persist as we expect them to, then next year should feel a more stable and positive year in the housing and mortgage markets.”