First-time buyer loans take yet another dive

15 August 2007
New data released by The Council of Mortgage Lenders (CML) has revealed a further reduction in the number of first-time buyers who are taking out loans.

The number has now dipped to 35,600 - significantly lower than the 39,800 loans taken out in June last year. However, while this figure shows an increase on the 34,600 first-time buyer loans seen in May, it is the lowest recorded figure for June since 2004 when a paltry 33,600 first-time buyers took out loans in order to get on the property ladder.

And it isn’t just first-time buyers who are putting the breaks on their lending. Figures show that the amount of loans to home movers has also dipped from 71,100 last year to the 66,300 recorded in June.

With five interest rate rises during the past year as well as the strong house-price growth in recent months, first-time buyers are finding it even more of a struggle to get a foot on the property ladder.

According to the CML they are having to borrow record amounts. The research shows that in June, the income multiple hit a new record at 3.37 times the average first-time buyer income - up slightly from 3.36 times in May, and 3.22 times in June last year.

In addition, the amounts that first-time buyers are forking out to cover the interest on their mortgages has also seen a significant rise and is now at 19.3% - compared to 16.5% in June last year.

The data has also revealed when first-time buyers are able to finally get on the property ladder, they are choosing the safe option of a fixed–rate mortgage. This June has seen the highest ever figure recorded at 90% - a one percent shift from May and seven percent up on last year’s figures for June.

Not to be outdone by the first-time buyers, home movers also appear to be favouring fixed-rate deals and the security against further interest rate increases and peace of mind when it comes to monthly repayments with 76% taking out such loans in June – again a one percent increase on May’s record which is a marked difference from the 63% who opted for fixed-rate loans in the same month last year.

Find out more about first-time buyer mortgages and fixed-rate mortgages