This year is the first since the financial crisis in which the number of loans advanced to both first-time buyers and buy-to-let investors increased by more than 10%. The only other post-crunch year in which lending to both types of borrower increased was 2010. But then the number of loans to each grew by just 1%.
The CML data show that lenders advanced more than 216,000 loans to first-time buyers last year. That was the highest annual total in five years, 13% more than in 2011, and the first time since 2007 that the number of first-time buyer loans has exceeded 200,000.
Different types of borrower have experienced contrasting fortunes since 2008, the year in which the number of loans advanced fell by around 50%, with first-time buyers, existing owner-occupiers and buy-to-let investors all similarly affected.
From 2009 onwards, the number of loans taken out by first-time buyers and existing owner-occupiers stabilised. Then, last year, we saw a pick-up in the number of mortgages advanced to first-time buyers.
In the buy-to-let sector, meanwhile, the pattern has been a little different. The decline in lending in 2008 was followed by another year of sharp contraction in 2009, before the market stabilised in 2010. Each of the last two years, however, has seen an expansion in buy-to-let lending, reflecting an improvement in both mortgage availability and the strength of demand in the rental sector.
This year, CML expects the positive trends in lending to continue. The Bank of England’s Funding for Lending Scheme should continue to improve mortgage availability for both first-time buyers and movers. The FLS will also benefit the buy-to-let sector, which will continue to be buoyed by rental demand.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says:
"While the general mood regarding the housing market has been one of increased confidence as Funding for Lending pushes down borrowing rates, the fall in gross mortgage lending in January shows we are not out of the woods just yet. December was a strong month for lending volumes but they took a hit last month as the bad weather had an impact.
"However, the outlook is still positive, despite the persistence of wider economic pressures. The FLS is resulting in lower mortgage rates across the loan-to-value bands, giving us some of the cheapest mortgage rates ever seen. This is increasingly important because of the other issues in the economy and will be essential if housing purchase activity is to remain robust this year, as we expect it to.
"Buy-to-let continues its recovery with mortgage rates falling, particularly on fixed-rate deals. As many first-time buyers struggle to get on the housing ladder, they are forced to rent for longer, persuading investors that the buy-to-let market presents the potential of better returns than cash or equities.
"As the cost of borrowing falls across the market, with rates on higher LTVs looking increasingly attractive, first-time buyers are able to put down more modest deposits. This is helping boost their numbers, with 2012 seeing the largest number of first-time buyers in five years. The growth in their number is significant for the health of the housing market and will fuel further growth.
"Most importantly for a market that rests on confidence, optimism in the housing market continues, despite the blip in January figures. The mortgage market is still constrained when you compare it with what it was at the height of the housing boom but it is showing some signs of improvement."
Ashley Brown, director, independent mortgage broker Moneysprite, said:
"At face value these figures are surprising, especially given the lower rates on offer and the boost from the Funding for Lending Scheme. They certainly don't reflect what we're seeing in the market today. What we are seeing, though, is a certain amount of drag, namely the delay between people getting a mortgage offer and actually completing on a property.
"So while the January figures are down, there is plenty of activity in the market, and this should feed through to more positive figures in the coming months. That's not to say, of course, the mortgage market is firing on all cylinders because it's not. And the CML are correct in that stubbornly high inflation will be a challenge to the property market. If people feel broke, they will be less inclined to buy.But the landscape is certainly a lot more robust than it was 12 months ago.
"As has been seen in numerous datasets recently, first time buyers are returning, buoyed by some very competitive rates. At present, it's possible to get 90% LTV mortgages at 3.75%, which is exceptional. And it's the same for borrowers with larger deposits - deals like the five year fixed rate being offered by First Direct at 2.69% available to borrowers with 35% deposits, are being snapped up.This seemingly endless stream of competitive deals is certainly fueling buyer confidence."
Ben Thompson, MD Legal & General Mortgage Club, comments:
“Lenders want to lend more this year and the data from CML today goes a long way to supporting the cautious optimism felt by much of the mortgage market at the moment. Although we still have a regional and patchy picture overall data such as that from the CML suggests that there may well be the early signs of a recovery. A recent study Legal & General Mortgage Club conducted with CEBR (‘A New Normal in the UK Housing Market’) suggests that the housing market and house prices have probably bottomed, and that barring unforeseen future events are now more than likely set on a path towards something that could be regarded as ‘normality.
"Our findings show that the value of the average home is expected to return to pre-crisis levels of £227,000 by the year 2015, and to reach £254,000 by 2017. While the market is broadly flat now, we expect an upward momentum to take effect and hopefully a healthier picture to emerge underpinned by a more considered and less cautious approach to lending.”
