Mortgage market getting better for first time buyers in the UK

There has been a significant rise in the number of first time buyer mortgage applications via intermediaries being approved in the UK as access to home lending improved for this sector.

The latest mortgage market tracer from the Intermediary Mortgage Lenders Association (IMLA) shows that 74% of first time buyers’ mortgage applications resulted in a completion during the fourth quarter of 2017, up from 53% in the same quarter in 2016.

The figures also show that nine in 10, some 88%, of first time buyers secured a mortgage offer, up from 73% in the fourth quarter of 2016. Some 84% of these offers went on to complete compared to 72% in the previous 12 months.

UK Finance data recently showed that first time buyer numbers reached a 10 year high in 2017 and the IMLA’s report suggests that this was helped by a rise in offers. Overall, it meant that 71% of first time buyer applicants achieved their aim of securing a mortgage in 2017, compared with 50% in 2016.

The report points out that the situation for first time buyers has improved without a noticeable change to the burden of mortgage repayments they are taking on. In December 2016 UK Finance data shows average first time buyer mortgage repayments were equivalent to 17.4% of income. This remained largely stable throughout 2017 and actually fell to 17.1% of income in December 2017.

The average loan to value also reduced slightly from 82% in December 2016 to 81.4% at the end of 2017 as first time buyers’ average borrowing remained stable as a proportion of the overall price paid for their homes.

The IMLA also points out that improving product availability, persistently low interest rates and strong competition between lenders and a cooling of house price growth have all helped first time buyers’ along with the continuation of the Help to Buy equity loan scheme. IMLA’s data suggests first time buyers’ fortunes have improved more than any category of borrower in the last year.

For every 100 applications, an additional 21 first time buyers completed on a mortgage in the final quarter of the fourth quarter of 2016. The next biggest improvement in terms of access to mortgage finance was among specialist borrowers, with the completion rate rising from 61 per 100 in the fourth quarter of 2016 to 73 in the final quarter of 2017.

Home movers saw the biggest quarterly improvement at the end of 2017 and were the only group to enjoy a greater success rate with mortgage completions in the fourth quarter of 2017 at 77 per 100 applications compared with 74 in the third quarter.

Despite wider uncertainty in the UK’s economic outlook, the improving performance of the mortgage market last year meant that intermediaries have approached the New Year with confidence about their prospects for 2018, the report also reveals.

Overall, 95% were confident about the outlook for the mortgage industry in the fourth quarter, unchanged year on year, while 56% were very confident about the outlook for the intermediary sector in particular, up from 52% a year earlier.

In terms of their own business’ activity, some 64% were very confident about the outlook in the fourth quarter of 2017, up from 61% at the end of 2016.

Kate Davies, IMLA executive director, said:

‘The mortgage market has proved itself to be resilient over the last year and intermediaries have continued to play a vital role in joining the dots between lender supply and consumer demand. In particular, first time buyers have benefited from widely available and competitively priced deals, even before the extra confidence boost of the stamp duty exemption announced in the Autumn Budget.

‘It is encouraging to see that mortgage repayments have remained stable even as more first time buyers make the step up onto the housing ladder. With the Bank of England base rate on a slow upward trajectory, lenders remain firmly focused on rigorous affordability tests so that borrowers do not overstretch themselves to achieve their ambitions.

‘At the same time, we need to be mindful that, as the latest English Housing Survey shows, more first time buyers are opting for loans of 30 years or more. This represents a shift in the dynamics of owning a home compared with previous generations, a fact emphasised by recent warnings from the Institute for Fiscal Studies about the decline of home ownership among younger adults.

‘Mortgage lenders can play their part in supporting access for first time buyers, and our figures show they are clearly doing so. Our improving success in satisfying the finance needs of first time buyers throws the spotlight onto policy makers to ensure that pressures on the availability and affordability of housing in the UK do not put young households off applying in the first place.’


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