The number of loans to first time buyers rose by 9% in May compared to April, and was 19% higher than in May 2013. By value, lending to first time buyers was up 11% on April and 30% higher than in May last year.
Both the number and value of loans to home movers increased month on month in May by 8%. Compared with May 2013, growth was up 9% by volume and 21% in value.
Reflecting these trends, overall home owner house purchase lending in May rose 9% on April by both volume and value, with year on year growth in number of loans up 13% and 25% by value.
Remortgage lending dipped in May, down 18% in number and value compared to April. Compared to May 2013, remortgage lending declined 26% in volume and 15% by value.
The monthly number of buy to let loans was up 4% in May with value up by 5%. Compared to April 2013, there was a 14% increase in number of loans and a 22% increase in overall value.
First time buyers took out 26,800 loans in May, up 9% compared to April and 19% more than in May 2013. The total value of these loans was £3.9 billion, which was up 11% on April and 30% on May last year.
The data also shows that first time buyer affordability changed fractionally, with first time buyers typically borrowing 3.43 times their gross income, compared to 3.42 in April. The typical loan size for first time buyers was £123,200 in May, up from £121,500 in April. The typical gross income of a first time buyer household remained unchanged at £37,000 compared to April.
The CML report says that the relatively low level of interest rates means borrowers' payment burden remains relatively low at 19.5% of gross income being spent to cover capital and interest payments, this remained unchanged from April but up from 19.3% in May 2013.
‘With May lending figures, we get our first glimpse at the effect the Mortgage Market Review has had on lending trends and, at least so far, the impact appears subtle, rather than dramatic,’ said Paul Smee, director general of the CML.
‘First time buyers and home movers continue to be key drivers in market growth and their activity does not seem to have been noticeably disrupted. There was no cliff edge. Lenders and intermediaries had been methodically working towards applying MMR changes for months leading up to implementation and the figures appear to reflect this,’ he added.
It’s a major boost to see first time buyer numbers rising with just a fractional change in affordability, despite the continuing pressure of soaring house prices, according to Simon Crone, vice president of Mortgage Insurance Europe for Genworth.
'May was the first month where the new mortgage rules (MMR) were fully operational, so the fact that first time buyer numbers were the strongest we have seen this year bodes well for the short term, although the market is still a long way from its pre-recession state of health,' he said.
'With the average loan to value (LTV) rising to 84% among first time buyers, we are slowly but surely edging back to a situation where parental hand outs aren’t the only means of buying your first home. But this has only been possible with special measures like the Help to Buy mortgage guarantee, which has been integral to restarting the pulse of the high LTV market and prevented it from flat lining,' he pointed out.
'There is a big difference between a place holder scheme like Help to Buy equity release and a permanent, stable framework to support first time buyer lending without sacrificing financial stability, which is why government needs to identify a long term solution. Without the confidence that capital relief will be available through private insurers after Help to Buy is gone, the availability of high LTV mortgages is likely to suffer and the shutters will be pulled down on first time buyers once again,' he added.
