Mortgage cheer as first-time buyers jump by a third

Positive news for homeowners, as mortgage approvals jump 33% - including a big rise in first-time buyers.

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Last Updated: 31 Aug 2010

Some 31,000 mortgages were granted in March, according to the latest figures from the Council of Mortgage Lenders – a 29% jump on the previous month. After months of the housing market apparently flatlining, it finally looks like some signs of life are starting to reappear – particularly since the proportion of first-time buyers is up again. Buyer enquiries and so on are all very well, but first-time mortgage deals are just about the clearest indication you can get that the market is beginning to move. Then again, activity is still at historically low levels, and it’s rising from an even lower base – so we won’t get excited just yet...

The CML claims that borrowers are enjoying the lowest mortgage costs since June 2004. With interest rates close to zero, the cost of servicing home loans has plummeted – to around 15% of income for a first-time buyer, and 11.4% for home movers, it says. Throw in lower house prices, and this is starting to tempt some would-be buyers into the market: some £4bn was doled out in home purchase loans during the month. About 40% of these deals went to first-time buyers; that’s about 12,500 people, borrowing on average three times their income – a 36% rise on February’s figure. (Remortgaging was also up slightly, although with so many homeowners now on relatively cheap variable rates, the CML thinks it will probably ‘remain muted’.)

There is a catch, however (or more accurately, a couple of catches). Buyers still need a big deposit to get their hands on these loans – for instance, the average for those 12,500 first-time buyers was 25% of the property’s value. That’s a fairly hefty sum of cash, particularly in the more expensive areas of the country. What’s more, the actual numbers involved are still relatively small, in historical terms – the total number of loans was a whopping 33% down on March 2008 (when the slowdown had already started), while the number of first-time buyers is also down 30% on this time last year. So although the month-on-month improvement is welcome, we’re starting from a very low base.

In fact, today’s figures are pretty much in line with the other economic data we’ve seen in the last couple of weeks. There are definite signs that things are improving, with the odd green shoot starting to appear (in terms of housing, retail sales, bank lending, exports and so on). But recovery is clearly still a long way off: unemployment (that famously lagging indicator) is now at 2.2m and looks set to rise above 3m, which is likely to depress activity in the coming weeks and months. Still, at least it looks like there’s some light at the end of the tunnel.


In today's bulletin:

BT loses 15,000 jobs - and £134m
Mortgage cheer as first-time buyers jump by a third
Network Rail boss gives gravy train the swerve
UK workers don't trust social media
Home-working causes headaches and clumsiness

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