First time buyer loans swell by nearly a third

MORTGAGE lending to first time buyers has jumped upward, rising by 31 per cent to £8bn in the year to June, according to Bank of England figures released yesterday.

New government schemes to boost activity in the housing market appear to have had the desired effect in the second quarter, as the Funding for Lending scheme pushes rates down.

Data compiled by the Bank and the Financial Conduct Authority (FCA) also shows that interest rates on gross advanced mortgages have reached the lowest levels since records began in 2007, dropping down to 3.47 per cent on average.

There has also been a significant increase in new commitments to mortgages, up to £47.5bn between April and June this year, rising by 19.3 per cent from the same period in 2012. New commitments are now at the highest level seen since 2008.

The amount of lending for buy-to-let arrangements saw a steady rise over the period from £3.9bn in the second quarter last year to £5bn this year.

Lenders’ appetite for risk also appears to have increased, with the proportion of high loan-to-value mortgages, and those which are many times the borrowers’ income rose to 1.6 per cent, a level last seen nearly four years ago.

Yesterday, the Royal Institution of Chartered Surveyors (RICS) also announced that widespread price increases were recorded this August, signalling that housing market activity will also push up lending in the third quarter.

Robert Wood, chief UK economist for Berenberg bank commented: “Momentum is likely to increase further in the coming months, and especially after January when anticipation of the government mortgage guarantee scheme turns to reality.”

Wood also added a more pessimistic note for the market’s future in general: “Any increase in housebuilding we see over the next few months and years, whilst welcome, will be woefully short of what is required to keep prices under control.”