There is some good news for people hoping to step onto the property ladder for the first time. Mortgage lending has reached its highest January total for five years, with first-time buyer activity particularly strong. First-time buyers were advanced a total of 15,900 loans, worth £2 billion. This figure was up by 24% on January last year and it was the highest number of loans for the first month of the year since 2008, according to leading housing research site Property Reporter.
First-time buyers are currently being helped by the Government with various schemes aimed at putting housing centre stage on the road to economic recovery- in the words of housing minister Grant Shapps. Aside from the Help to Buy scheme announced in the Budget, where buyers will only have to save up a five per cent deposit, with the Government underwriting a further 15 per cent of the value, thousands of people are now finding it easier to get that all-important first foot on the housing ladder. This is in large part thanks to the Bank of Englands Funding for Lending Scheme.
The Funding for Lending Scheme created a significant boost to home ownership when it was launched at the end of 2012. The aim of this scheme is to encourage more lending to homebuyers by lending banks around £60 billion by the end of January 2014. The money that is being lent to banks by the Bank of England means that they can lower the required mortgage deposits to 15% and 10% or even 5% of a propertys value. This means that homebuyers, particularly first-time buyers, have a good incentive to explore the possibility of home ownership. This is good news indeed when rents are becoming increasingly expensive and in some cases, unaffordable.
There is now some evidence that schemes such as Funding for Lending coupled with other initiatives including FirstBuy and NewBuy are having a positive effect. For the third month in a row, first-time buyer activity made up 42% of all house purchase loans.
On a quarterly basis, the last time the proportion of first-time buyers was higher than 42% was in 2001. A slight improvement in affordability for first-time buyers both in absolute terms and relative to income is now pointing towards more positive conditions in the wider housing market. The Help to Buy scheme should also provide first-time buyers with the additional extra impetus they need to move from renting to buying their first home. This will in turn help to improve movement further up the property ladder, which should have a positive knock-on effect in terms of improved property prices.
Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm.
Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: www.latimerhinks.co.uk or call 01325 341500.