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House Purchases By First Time Buyers At Five Year High

News Posted On: 15 February 2013

More first-time buyers across the UK are buying houses than at any time since the financial crash, new figures show. A total of 216,200 first-time buyers became homeowners in 2012, pushing the annual total over the 200k mark for the first time since 2007. It also represents a year-on-year rise of 12% on 2011, when 193k loans went to first-time buyers.

A total of 19,100 loans were advanced to first time buyers in December of 2012 – a 12% drop on November the same year but a 3% rise on December 2011. By value, first-time buyer loans in December came to £2.4m, an 11% fall on the previous month. This suggests that a greater number of buyers with less money to spend were entering the market during December, despite obvious reasons why there might be a seasonal dip in the month before Christmas.

In the final quarter of 2012, first time buyers accounted for 42% of all house purchases, as opposed to the typical rate of about 38%. Of these, 2.5% took out mortgages at 95% LTV, as against less than 1% a year earlier, showing the effect of schemes by lenders and Government to increase access to mortgage credit for high-LTV borrowers. Around 20% borrowed 90% or more though the average LTV stayed where at 80%, where it has held for over two years.

However, despite the improvement in first time buyer figures, there is still difficulty obtaining credit for some. David Newnes, a director of LSL Property Services, which owns Reeds Rains and Your Move, said, ‘although the range of high LTV deals has improved, banks are still incredibly cautious about their level of lending in this bracket and it is still tough for most buyers to secure a mortgage without more than a 15% deposit.’

LSL reported that the average age of first time buyers has fallen to 28, ten years younger than some other organizations are reporting. If their figures hold good, we could be seeing the end of ‘generation rent,’ a generation of people who would otherwise have been homeowners but were compelled by high prices to rent long after they wished to buy.

Peter Rollings, chief executive of estate agent Marsh and Parsons, weighed in with the optimism reported by LSL. He credited the Funding for Lending scheme with rekindling the mortgage market, and said that ‘the freeze on lending is starting to thaw… fanning the fames of the first-time buyer market.’

Mr. Rollings also predicted a knock-on effect leading to greater liquidity throughout the property market: as first-time and other low-LTV buyers enter the market, their purchases unfreeze property chains, leading to more activity further up the line too.

Figures from the Office of National Statistics suggest that prices also rose slightly in the same 12-month period when first-time buyers rose, with the amount first-time buyers paid 2.7% higher on average than in December 2011. For owner-occupiers, though, prices rose by 3.5% over the same period. The ONS said the average price of a house rose to £233k, highest in England at £242k, lowest in Northern Ireland at £130k. Scotland’s average was £178k, and Wales’ was £158k.

As a result, house prices may be accelerating out of some first-time buyers’ grasps even as credit comes within reach. Mark Harris, chief executive of mortgage broker SPF Private Clients, said it was ‘not too early to call the end of the mortgage impasse, but cautioned: ‘let’s not get ahead of ourselves.’

Opinion within the industry and statistical evidence seems to offer the same cautious optimism.

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