First Time Buyer Loans Still A Struggle
Over the course of the year so far, we have seen a steady improvement in the availability of new home owner loan products, particularly for first time buyers, as banks and building societies begin to slowly relax their lending criteria slightly.
Although there has been this general improvement in loan availability in recent months, the latest figures from the Council of Mortgage Lenders (CML) have revealed a reversal in this trend, with first time buyer loans becoming tougher to be accepted for during the month of July.
Although the loan products and interest rates for first time buyer loans themselves have not changed significantly, lenders are now once again lowering their maximum loan to value ratios and requiring larger deposits from potential buyers.
During the months of April and May this year, the average first time buyer loan had a loan to value of 79 per cent, but by June and July this year this had reduced to just 76 per cent loan to value, as lenders seem to be becoming more cautious once again.
Once they have managed to save up a suitable deposit, loans for first time buyers are now at their most affordable for several years, with loan interest only using up around 13.2 per cent of a typical first time buyer’s income each month.
Despite this, the number of first time buyer loans has fallen in July to just 19,400, from 19,700 in the previous month and 20,100 twelve months ago, with just over a third of new loans being for first time buyers, the lowest proportion for three years.
Paul Samter of the CML commented on the figures, he said “More generally, lending criteria remains tight, underpinned by caution on the part of both borrowers and lenders in the light of continuing economic uncertainty.”
