First-time buyers have lowest market share for three years

13 September 2010 | By Samuel Dale

The figure dropped from 38% in June to 34% in July and is at its lowest share of the market since the start of the credit crunch in August 2007.

Loans to first-time buyers declined to 19,400, worth £2.4bn, in July, from 19,700, also worth £2.4bn in June and from 20,100, worth £2.3bn, in July 2009.

First-time buyers had average LTVs of 76% in the month, unchanged from June but up from a recent trough of 79% in April and May.

But low interest rates mean that interest payments continue to take up a relatively modest share of income. At 13.2% this was down slightly from the previous month and the lowest it has been since early 2004.

There were 56,000 loans for house purchase, worth £8.4bn, advanced in July, up from 52,000, worth £7.7bn, in June, and from 53,000, worth £7.3bn, a year ago.

The CML says that while this reflects the seasonal rise in activity at what is usually a strong part of the year, these volumes still represent a very weak market.

The 28,000 remortgage loans, worth £3.5bn, were unchanged from June and down from 40,000, worth £4.9bn, in July 2009.

There were 36,900 home mover loans, worth £6bn, up 13% in volume and 15% in value from June and 11% in volume and 20% in value from a year earlier.

Like first-time buyers, home movers have seen their average deposits rise again - from 33% in June to 35% in July.

But their interest payments as a percentage of income have held steady at 9.6% - still the lowest share going back to the early 1970s.

The take-up of full repayment products has remained high for a year. In July, 90% of first-time buyers took out a repayment mortgage, compared to July 2007, before the credit crunch, when only 67% did.

A total of 72% of home movers and 70% of those remortgaging also chose a full repayment mortgage in July this year.

Paul Samter, economist at the CML, says: “The increase in the prevalence of repayment mortgages is likely in part to reflect the anticipation of regulatory changes by the Financial Services Authority to limit the availability of interest-only mortgages.

“More generally, lending criteria remain tight, underpinned by caution on the part of both borrowers and lenders in the light of continuing economic uncertainty.”

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