First-time buyers at 10-year high in 2017 but the mortgage market weakened in December

Jasper Jolly
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First-time buying activity has sustained by the Help to Buy government subsidy (Source: Getty)

The number of mortgages taken out by first-time buyers boomed last year to its highest level since 2006, buoyed by the Help to Buy subsidy.

Banks lent money to 365,000 first-time buyers in 2017, an increase on the year before of 7.4 per cent, according to UK Finance, the lenders' industry body.

However, the December figures were significantly weaker, reflecting an increasingly nervous housing market.

Read more: Mortgage approvals fell to a three year low last month

Mortgage approvals at the end of the year across new buyers and home movers both fell. The number of new loans to first-time buyers fell by 5.2 per cent, while the number of new loans to home movers fell by 4.7 per cent.

Buy-to-let mortgages saw a particularly steep slump, with 17.2 per cent fewer purchases than a year earlier due to recent tax changes penalising landlords using finance to buy properties.

Remortgaging bucked the trend, with an 8.3 per cent year-on-year increase as the November rate rise from the Bank of England – and the promise of more to come – spurred homeowners to lock in lower rates before the hiking cycle begins in earnest.

Read more: UK mortgage approvals fell to a four-year low in December

The size of the median loan advanced continued to rise, reflecting the seemingly inexorable rise of house prices even as real wages have fallen. However, industry watchers remain downbeat in their outlook for the market because of the squeeze on incomes.

The weaker December figures are consistent with forecasts of "subdued growth" in the mortgage market this year, according to Paul Smee, head of mortgages at UK Finance.

"Although the market remains competitive there is no room for complacency," he said. "We are also seeing a less buoyant buy-to-let market, which continues to be impacted by recent tax and regulatory changes. This will continue to flatten gross lending volumes this year."

Read more: It's official: London was the weakest region for house price growth in 2017

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