A steep increase in first-time buyers teamed with a modest increase in lending at higher loan-to-value ratios has led to hopes that the property market is undergoing a long-awaited recovery.
According to figures from the Council of Mortgage Lenders (CML), more first-time buyers got a foot on the property ladder last year than at any time since the financial crisis began.
A total of 216,200 first-time buyers became homeowners in 2012, marking the first time the annual total has exceeded 200,000 since 2007. This also represents a year-on-year rise of 12% on 2011, when 193,000 loans were advanced.
Paul Smee, director general of the CML, said: “First-time buyers, in particular, have benefitted from the effects of better funding conditions and the Funding for Lending Scheme (FLS), with the number of new people moving into home-ownership in 2012 reaching the highest level for five years.
“This, along with other factors, confirms that lenders really are open for business.”
He added that there was a slight increase in lending at higher loan-to-value (LTV) ratios in the final quarter of the year.
While the average LTV stayed at 80%, where it has been for two years, one in five first-time buyers acquired 90% LTV mortgages or more and one in 40 borrowed 95% of purchase price.
David Newnes, a director of LSL Property Services, said that the government’s Funding for Lending scheme is “certainly helping”, with lenders expecting total mortgage advances to rise to £156bn this year, up from £145bn last year.
However, he warned that expensive deposits are still proving a hindrance for would-be buyers.
“Although the range of high LTV deals has improved, banks are still incredibly cautious about their level of lending in this bracket and it is still tough for most buyers to secure a mortgage without more than a 15pc deposit,” he said.
“This leaves thousands of buyers reliant on the Bank of Mum and Dad to secure their first home.”