With mortgage lending on the rise, with a 45% increase in March this year, compared to the same time in 2009, a survey by the Council of Mortgage Lenders suggests that borrowing for residential property has now increased for nine months, with many first-time buyers contributing the largest amount to the increase.
The report shows that first-time buyers borrowed roughly £2 billion in March, representing an increase of at least 27%, compared to the month before. The study also shows that the average loan requirement was around 76% of the property’s value, pusing the average deposit under 25%.
Although this is excellent news for first-time buyers it is thought that the buy-to-let sector is likely to suffer with the increase in borrowing by first-time buyers. The threat of the new Capital Gains Tax rules, coupled with Stamp Duty exemption for first-time buyers is certainly making the future outlook of the sector appear bleak.
In spite of this there is still concerns amongst analysts and economists about the volume of mortgage credit available. The Council of Mortgage Lenders (CML), are of the opinion that there will be a return to “credit rationing” within the next 12 months as banks are still expected to pay back the money they were forced to borrow from the taxpayer.
The CML’s Director General, Michael Coogan, commented:
“Today’s figures indicate there is currently some momentum to house purchase lending.”
However, Mr Coogan went on to caution the new Government to focus on critical issues such as funding and repaying the emergency support provided to the country, in particular to the banks, during the recession. He added:
“The UK is at risk of a chronic under-supply of credit – and the rationing of mortgages for customers – for years to come.”
With many banks and large building societies still owing over £300 billion in emergency funding Mr Coogan’s warning is certainly apt and is something that we all hope the Government will consider in the emergency budget in June.