First time buyer quarterly advances highest since 2007

First-time buyers are reaping the benefits of the government’s incentive schemes as the value of loans advanced to fledgling property owners in Q3 reached the highest quarterly amount since Q4 2007.

The Bank of England Mortgage and Financial Conduct Authority Lending Statistics showed advances to first-time buyers increased by £2.7bn over the past year to £9.9bn, a 37% rise and the highest quarterly amount since quarter four 2007.

Historically low interest rates and cheaper funds for lenders have had a hand in paving the way for new property owners to realise their dreams of getting on the first rung of the housing ladder.

The overall average interest rate on gross advances continued its downward trend falling by 15bps in Q3 2013 to 3.32%, the lowest interest rate recorded since the series began in 2007.

This was driven by fixed rate loan average rates decreasing by 18bps to 3.40% and variable rate loan average rates decreasing by 7bps to 3.07%.

Fixed rate mortgages remained the most popular product choice accounting for 77.3% of overall gross advances in Q3, the fourth successive rise in fixed rate products.

Despite the rise in first-time buyer activity the proportion of gross advances over 90% loan to value decreased from 2.5% in Q2 2013 to 2.2% in Q3 2013.

But even though borrowers are putting down larger deposits income multiples continued to rise as house prices began to recover across the UK led by a strong recovery in London and the South East.

The proportion of gross advances to high single income multiple borrowers, more than four times income, increased in Q3 2013 by 0.3% to 10.5% compared with Q2 2013.

And the proportion of gross advances to high joint income multiple borrowers, more than three times income, also increased in Q3 2013 by 2.4% to 27.2%, the highest since the series began in 2007.

Overall the proportion of new lending at a combination of high loan to value and high income multiple fell back to 1.3%, the same level as Q1 2013.

Peter Lawrence of Lawrence Rand said: “These figures reinforce the growing optimism in the housing market and the re-emergence of first time buyers who are a vital part of a healthy market place.”