Mortgage blog: FTB borrowing up as end of stamp duty holiday slump ends


Thursday 26th July 2012

Lending to first-time buyers is on the rise again

The number of first-time buyer mortgages advanced in May 2012 was up by over a fifth compared to the same month last year. In a sign that the slump following the end of the stamp duty ‘holiday' is over, data showed that first-time buyers borrowed £2.3 billion in May 2012, up by almost 50% on April's figures. Mortgage lending was also up across the board, suggesting a small recovery in the housing market. However, some experts remain pessimistic in their outlook, as we see here.

The latest figures from the Council of Mortgage Lenders (CML) revealed that purchase loans grew to £7.2 billion in May, up by 36% on April, and 29% compared to last May. The number of mortgages taken out also increased in May, rising by 33% against April to 48,300, and by 24% compared to May 2011. The CML said that remortgage lending had also risen, from £3.1 billion in April to £3.5 billion in May.

And, after a slump in first-time buyer borrowing following the end of the stamp duty ‘holiday' in March, lending to new homeowners also increased. £2.3 billion worth of loans were advanced to first-time buyers during May 2012, a rise of 43% compared to the previous month and by 22% on May 2011.

FT Adviser reports that "average loans taken out came to £104,000, up from £97,750 in April, at an average of 3.12 times the borrower's income." CML director general Paul Smee said the end of the post-stamp duty holiday slump was "positive news for the market", but believes that with a great deal of economic uncertainty in the Eurozone, consumer confidence was still low.

Keith Osborne from said: "It's pleasing to see that ending the stamp duty holiday hasn't put all first-time buyers off getting onto the property ladder. However, unless lenders continue to offer mortgages to buyers with a smaller deposit the outlook remains uncertain. Unless the government's recent initiatives actually filter down to first-time buyers through more competitive deals and higher loan-to-value mortgages, I can't see a great improvement in the mortgage market on the horizon."

Mortgage expert David Pye agrees. He says: "Despite these figures being positive I can't see where growth is going to come from. We have an uncertain economy, especially on the jobs front, and the problem is accentuated by a lack of deposits and suitable mortgage products."

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