Positive signs for first time buyers
Last year ended on a positive note as far as the property market was concerned with lending for first time buyers increasing by 11 per cent and lending to borrowers with small deposits reaching its highest level since the start of the financial crisis.
The latest figures show that almost 64,000 house purchase loans were granted to buyers with small deposits last year, rising from 57,691 in 2011. It marked the best year for high loan-to-value lending since 2007.
Last year was also a strong year for house purchase lending since 2007, with the number of loans breaching the 600,000 mark. Purchase approvals rose three per cent from 590,425 in 2011 to just over 607,000 also.
Stabilisation of the Eurozone and access to cheaper mortgage funds for banks were the foundations of the improvement, says Kevin Hallam of Lovelle Estate Agency, Market Rasen.
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2012 was a year of two distinct halves for first-time buyers. Home purchase loans were split equally between the first and second halves of the year and loans to first-time buyers fell away sharply by 13 per cent in the second half of the year. Banks sustained lending levels in the second half of the year though by focusing lending on wealthier borrowers at the expense of first-time buyers.
Although the range of high loan-to-value mortgage products available has improved, banks did continue to keep a close reign on underwriting criteria more generally in the second half of the year, despite a record quarterly increase in quarter four to the mortgage credit available to lenders, in part stimulated by the Funding for Lending Scheme.
In line with the poor second half of the year, house purchase lending dipped sharply in December with purchase approvals falling nine per cent to 49,113 from 54,036 in November, and there were seven per cent fewer loans than in December 2011.
On a positive note The Bank of England has suggested Funding for Lending will have a much greater impact on lending this year, together with a relaxation of bank capital adequacy rules, which will give lenders more time to establish the capital buffers stipulated by regulators, freeing up more funds for mortgage lending in 2013.