The number of mortgages taken out by first time buyers has hit the lowest level since records began in January 2002, according to the Council of Mortgage Lenders (CML).
The overall volume of house purchase loans in July was 47,400 loans worth £7.1billion, which represents a 51 per cent fall by volume and 54 per cent fall by value from the same time last year.
Due to tighter lending criteria, the number of new first time buyer mortgages
taken out in July decreased to 17,300, down by 5 per cent from June and 48 per cent from July last year.
In view of the falling house prices many first time buyers tend to adopt a 'wait-and-see' attitude, but others struggle to come up with a high enough deposit. On average first time buyer had to have a deposit of 15 per cent in July, up by 2 per cent from June, a loan-to-value ratio which was last experienced in the early 1980s.
New homebuyers were typically able to borrow 3.24 times their income, a fall from 3.33 in June and the lowest figure since July 2006. Also, the size of the average first time buyer mortgage decreased from £125,000 in the previous four months to £120,170 in July.
By contrast the number of remortgage
loans increased quite significantly by 14 per cent in June to 85,000 mortgages worth £11.9billion in July. 30,100 mortgages for home movers were approved in July, up from 3 per cent in June, but more than 53 per cent less than last year.
Tracker mortgages increased in popularity as borrowers expect the next bank rate move to be downwards; accordingly 28 per cent took out tracker mortgages as opposed to 21 per cent in the month before.CML
director general, Michael Coogan, said: "Tighter lending criteria have clearly made it more difficult for first-time buyers to enter the market. The stamp duty and shared equity measures announced by the government last week will be helpful to those first-time buyers looking to enter now, but many may be waiting for house prices to stabilise.
He added: "Restoring the flow of funding to the mortgage market is crucial to helping the housing market recovery," and said he was looking forward to the findings of the government-sponsored review on housing by Sir James Crosby at the end of the month.
© Fair Investment