Number of first-time buyers up by a third

Lending to first-time buyers took another huge leap in August, according to data from the Council of Mortgage Lenders (CML).

First-time buyers took out 27,100 loans in August, a 33% increase on a year earlier and up 7% from July, according to the latest figures from the CML which show further signs of growth in the housing market.

The data also shows that first-time buyers are stretching themselves more in terms of their income versus their borrowing. The CML said that in August, borrowers typically took on 3.36 times their income, compared with 3.31 the previous month and 3.25 the year before. The August figure is the highest since 2007, when it reached 3.38.

Although stretching borrowing like this appears unaffordable, low rates meant that repayments remained manageable; repayments on average accounted for 19% of income, down from 20% the previous year.

This surge in interest came in anticipation of the second phase of the government’s Help to Buy scheme, which offers government backed mortgages to first-time buyers with small deposits, and launched this week. Although many believe that a new optimism from first-time buyers is to be welcomed, critics of the scheme warn that it could contribute to a second bubble in house prices.

The rest of the mortgage sector also saw growth, according to CML’s figures; total house purchase lending increased 7% in August, marking the 6th successive month of growth.

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.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, also commented on the findings, believing that the publicity around Help to Buy, as well as the government’s Funding for Lending scheme, were “creating interest and instilling the belief that is finally possible to get a mortgage.”