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First-time Buyer

Help to Buy ‘pushes up LTVs’ for first-time buyers

Samantha Cordon
Written By:
Samantha Cordon
Posted:
Updated:
13/03/2014

The average loan-to-value for first-time buyers was 82% in January up from 80% a year ago, lending data from the Council of Mortgage Lenders revealed.

The CML said this increase in LTV is evidence that the government’s Help to Buy scheme, which allows borrowers to put down as little as 5% deposit, is impacting lending conditions for first-time buyers.

However, Mark Harris, chief executive of mortgage broker SPF Private Clients, said that despite a slight rise in LTVs for first-time they still remained “modest”.

“While more lenders are offering high LTV products at more competitive rates the average LTV for first-time buyers was a modest 82 per cent in January,” he said.

“This suggests that buyers are saving hard to take advantage of cheaper mortgage rates or getting help from the bank of mum and dad.

“It doesn’t suggest that borrowers are over-extending themselves and taking on more borrowing than they can afford.”

Income multiples increased year-on-year highlighting first-time buyers are putting in less of their own money to get onto the property ladder.

In January this year first-time buyers borrowed 3.39 times their gross income compared to 3.23 times in January 2013.

But as interest rates remained low the amount of income used by first-time buyers to cover capital and interest payments fell from 19.8% in January last year to 19.3% this year.

More than 95% of first-time buyers opted for fixed rate mortgages in January.

The total number of loans advanced to first-time buyers in January totalled 21,800 down 18% on December 2013 but an increase of 38% compared to January 2013.

The total value of these loans was £3.1bn, down 16% on December 2013, but a year-on-year increase of 55% in comparison to January 2013.

The total number of loans advanced to home-owners for house purchase decreased in January, down 16% compared to December but up 30% on January 2013.

Overall, 48,600 loans were advanced in January with a total in value of £8bn, which was a decrease of 14% in value on December 2013 but a 43% increase in comparison to January 2013.

Home-owner remortgage activity increased in January with a total of 28,000 remortgage loans advanced, up 10% in volume compared to December and up 16% compared to January 2013.

These loans totalled £4.2bn in value, an increase of 11% on December and up 31% compared to January 2013.