The return of the first-time buyer?

by John Fitzsimons on 12 August 2009  |  2 comments
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New figures suggest things are starting to get a little better for the first-time buyer.

Back in February, I was chatting with a director of a mortgage lender. When I told him I had just bought my first property, he broke into a big grin and said "Blimey, so you're the one first-time buyer for this month - well done!"

OK, so he was massively exaggerating how bad it was for first-time buyers, but there was some truth in what he said. According to figures from the Council of Mortgage Lenders, just 9,400 loans went out to first-time buyers in February - barely half the 17,400 loans dished out in February 2008.

Fast-forward to the present day, and there appears to be something of a resurgence taking place.

The most recent figures show that 17,200 mortgages, worth £1.9bn, were handed over to first-time buyers in June. That's a big old jump - in fact it's up by nearly 4000 from May, or 26%. Ok, it is still a little behind last June's numbers (18,400), but it's still a pretty positive development.

So what's behind this jump?

I think it's a number of things. It helps that the demand is there. Unbiased.co.uk is a site which puts borrowers in touch with financial advisers, and first-time buyers continues to dominate the searches, accounting for 41% of all consumer requests over the past quarter.

But a big factor in my opinion is that people's expectations of their home's worth have become more reasonable. This has led to the increase in transaction levels we are seeing, and as such the 'calling' of the bottom of the market.

And because things are starting to move again, the lenders are beginning, very slowly, to offer more attractive deals to first-time buyers. Just this week Coventry Building Society slashed the rate on its first-time buyer mortgage for those with a 15% deposit by 1%, from 5.99% to 4.99%.

And as those deals become more attractive, more prospective buyers are opting to take the plunge and go for it.

Of course, it's not all rosy for first time buyers. They still face very little choice of products if they have a deposit of any less than 25%, at fairly punishing rates, while the lenders are still only too happy to jump on any reason to reject an application.

The property market simply cannot function without first-time buyers having access to it, so it's in all of our interests that first-time buyers once again resume their position as the drivers of the market.