Lending to first-time buyers soars 33% to six-year high in August in dash for cheap mortgages as property market hots up
There was a 33 per cent increase in the number of first-time buyers taking out a mortgage in August compared to a year earlier as conditions continue to improve for those looking to get onto the property ladder.
There were 27,100 loans worth £3.8billion handed out to first-time buyers last month to reach a six-year high, Council of Mortgage Lending figures revealed.
The jump in availability of mortgages, including deals demanding deposits of less than 10 per cent, adds evidence to how much the property market has thawed in the last 12 months.
Looking up: First-time buyers can enjoy the light at the end of the tunnel and browse attractive fixed-rate mortgages demanding deposits of as little as 5%
But the latest CML figures will also add to concerns the Government’s Help to Buy scheme is fuelling a new housing bubble.
Today, Halifax started taking mortgage applications from people with five per cent deposits under the second phase of the scheme.
This second part of the scheme aims to give credit-worthy borrowers with low deposits a helping hand to buy a mortgage, with lenders offering state-backed products.
The CML figures showed first-time buyers stretched their borrowing in relation to their income in August, borrowing 3.36 times their salary typically - a jump from 3.31 in July. The latest figure marks the highest borrowing ratio seen for first-time buyers since 2007.
The data also showed 34,200 mortgage deals worth £6billion were advanced to home movers in August, marking the highest number seen since mid-July.
Overall lending for house purchase took another steady step up of seven per cent on July and 15 per cent on August last year.
A record 86 per cent of mortgage borrowers took advantage of the cheap deals currently on offer by taking out fixed-rate mortgages in August, the CML said, with 94 per cent of first-time buyers opting for a fixed-rate deal.
Buy-to-let loans took a gentle knock to 14,900 loans in August, down from 15,200 in July, with a value of £1.9billion.
Paul Smee, director general of the CML, said: ‘The healthy growth in all lending areas compared to the same time last year is indicative of more confidence in the market.
‘The high number of borrowers, in particular first-time buyers, opting for fixed rates reflects the attractive pricing currently on products which can provide helpful stability to borrowers for the next few years.’
Richard Sexton, director of e.surv chartered surveyors said the rapid rise in mortgage lending will merge into a dramatic recovery once Help to Buy 2 kicks in.
He said: 'Lending to buyers with small deposits is already up 60 per cent compared to twelve months ago, and overall house purchase lending is getting close to 70,000 per month.
'When Help to Buy 2 does kick in, we expect lending to homebuyers to rise beyond 70,000 per month before the year is out. And it should carry on rising.'
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