A bad month for first time buyers

Mortgage approvals for first time buyers in April fell to their lowest level for nine months, according to the April Mortgage Monitor from e.surv chartered surveyors.

Loans on typical first time buyer property worth up to £125,000 fell to11,307 in April, 5% lower than in March and 1.2% down on April 2011. It is the third successive month in which first time buyer loans have fallen.

The research suggests first time buyers were the hardest hit as banks reduced the availability of high loan-to-value mortgages in April following increasing funding costs and tightening credit conditions. There were fewer loans to borrowers with small deposits, as the number of loans confirmed to borrowers with a deposit of 15% or under fell to 5,309, some way below the three-month average of 6,229.

In the general market, loans for house purchases fell to 49,165 in April, a drop of 1.4% from March. However, approvals in all price brackets over £350,000 increased. The average deposit on a house purchase loan rose above 40% for the first time since February last year.

“The market has shown real fighting spirit and stood up well to the economic malaise engulfing Europe and the UK economy,” said
Richard Sexton, business development director of e.surv. “Up until the early spring mortgage lenders did a sterling job of coping with steadily increasing funding costs imposed by investor anxiety in the wholesale markets. They absorbed them, rather than passing them onto borrowers. This helped them cater for the rush of first time buyers looking to beat the stamp duty deadline, and helped boost activity in the housing market over the late winter and early spring.

“But we’ve reached a tipping point now. Banks and building societies can’t afford to sustain their current levels of high loan-to-value lending. In addition to their increased funding costs, they are also concerned about their exposure to the debt-riddled European countries, and the increasingly precarious state of borrower finances in the UK. As a result they’ve begun to scale back lending to first time buyers.”

Useful web sites for more information

• Independent Property Search Engine
• Independent House & Home section

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