The Council of Mortgage Lenders published positive figures this week stating a 20% uplift in lending to first time buyers. Compared to the recorded figures from March 2012, the number is relatively low, as 24,400 loans were taken up at that time. But this figure should be taken in context by contractors, as there was a marked rise in activity at that time, due to the stamp duty holiday for properties up to £250,000 coming to an end.
A pleasing point to note for economists is that overall lending figures for the first quarter of 2013 are only a shade away from 2012’s figures. For the opening three months of the year, 50,900 loans were advanced, compared to 51,200 in the previous year. All of this is in spite of the lack of a stamp duty holiday for contractors and the increase in activity that this created at the time.
It is becoming clearer in recent months that lenders are heading calls for reduced higher loan to value rates, which many in the industry felt would open the door for more first-time buyer activity. In contrast to last year, contractor-friendly lender Halifax had first-time buyer rates for 90 per cent loan to value at 6.29 per cent. However, the most competitive option with the same lender now comes in at 4.99 per cent. The impetus for this switch in strategy stems from the government’s Funding for Lending scheme, and the hope for contractors is that rates will tumble further through the rest of the year.
At present, first-time buyer activity is attributing to a higher proportion of all purchase loans acquired, with the statistics stating a 45 per cent market share in this area. As the market begins to enter one of the traditionally busiest times of the year, it is positive to see that home purchases rose within March, clocking a total of 42,000 loans over the period. This constituted a 15 per cent rise on February’s figure of 36,600.
The director general of The Council of Mortgage Lenders, Paul Smee, commented: “First-time buyer activity in the first quarter was nearly at the same level as last year – when figures were buoyed up by the end of the stamp duty holiday. This suggests that the market continues to be favourable for those looking to buy their first home. More borrowers are taking out higher loan-to-value mortgages than any other time in the last four years - a sign that lenders are open for business, and that borrowers, even those without a large deposit, are increasingly able to get a foot on the property ladder.”
The introduction of the governments Help to Buy scheme seems to have garnered further interest from contractors, but lenders have been slow to broadcast any interest in lending on this basis. Gradually, this now appears to be changing, as Halifax, a long standing supporter of contractors, first time buyers and assisted purchasing schemes has recently released a set of specific Help to Buy products. And yesterday, Natwest Intermediary Solutions released the news that they will be offering a similar proposition on a selected base of products.
True first-time buyer incentive packages have been absent from the market for quite some time, but more and more lenders are now offering added extras to entice custom. Coventry Building Society will offer a free valuation on the majority of their purchase products, if the cost does not exceed £670 and the survey is booked via their trusted surveyor. Others, such as Virgin Money, who also have bespoke underwriting arrangements for contractors, will offer cash-back on selected products that essentially cover the cost of the arrangement fee for the loan.
Perhaps most interesting for contractor first-time buyers is the offer that Halifax introduced at the start of May. For any first-time purchaser buying a property under £250,000, they will pay for the 1 per cent stamp duty, in the form of cash-back on completion. Although these options are not available on newly built property, this offers a substantial saving for many contractors looking to get onto the ladder.
Article by: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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