Mortgage lending rises in March but FTBs have little to celebrate

Gross mortgage lending rose 24% in March from £9.3bn in February to £11.5bn, but research shows that lenders are still making life difficult for first-time buyers.

The Council of Mortgage Lenders says March’s figure was a 3% rise from the £11.2bn seen in March 2009 and is in line with the typical seasonal pattern of a rise in lending volumes.

But gross lending for Q1 2010 was an estimated £29.5bn, a 24% decline from Q4 2009 when lending totalled £38.9bn.

Figures from financial research specialist Defaqto shows that first-time buyers with small deposits are now paying substantially more for mortgages, making it difficult for them to get on the housing ladder.

David Black, banking specialist at Defaqto, says: “Three years ago there was little difference in the interest rates charged whether you had a 10% or a 25% deposit.

“Since the credit crunch hit the situation has changed significantly and those seeking higher LTV mortgages are now having to pay much more.”

But analysis from Moneynet.co. uk shows that first-time buyers who scrape together a 10% deposit are in a better financial situation now than if they had bought in autumn 2007.

Based on Nationwide Building Society’s house price calculator, Moneynet says a property worth £130,000 in Q3 2007 has now fallen 11.5% to £115,000 in Q1 2010.

A first-time buyer in 2007 would have needed a 5% deposit of £6,500 and to pay Stamp Duty of £1,300.

This would have given them access to a three-year fixed rate deal with Britannia Building Society at 6.19% with a £399 fee.

But although a first-time buyer in 2010 would require a 10% deposit of £11,500 there would be no Stamp Duty to pay.

The equivalent three-year fixed rate deal has dropped to 6.03% from Nationwide, with a £995 fee.

This gives a monthly repayment of £675.18 for today’s first-time buyers compared with £812.73 for 2007’s buyers.