First Time Buyers Lose Out to Wealthy Borrowers

First-time-buyer numbers in September fell to their lowest since November 2010 thanks to tightening mortgage lending conditions, reversing the positive summer trend of higher loan-to-value lending and increasing numbers of first-time buyers. Lenders focused more on targeting wealthier borrowers as fears over a stagnant economy and constricted credit conditions grew, reports the Henley Standard.

Approvals with a deposit of 25 per cent or under fell to their lowest number since February, accounting for less than half of all lending, compared to almost two-thirds in September 2007. Approvals in the highest loan-to-value brackets fell at more than double the pace of the total market because of lenders’ desire to target low loan-to-value borrowers.

London bucked the national trend, and cushioned the overall decline in approvals nationally, with an increase of 20 per cent (non-seasonally adjusted), thanks to the bigger pool of wealthier buyers in the capital who are less constrained by tighter lending conditions. First-time-buyer numbers rose to their highest since June, with approvals on price brackets up to £250,000 — typical first-timer property in the capital — accounting for 42 per cent of the total London market, compared to 40 per cent in August.

The uptick can be attributed to buyers in London being much less dependent on high loan-to-value lending than the rest of the country. Approvals with an loan-to-value of more than 75 per cent accounted for just a quarter of all lending in September, compared to over a third nationally, because the wealthier pool of buyers in London typically have larger deposits so don’t require access to higher loan-to-value products, and because even a small percentage deposit represents a very large sum due to higher house prices in the capital.

The market outside London was much more subdued. The North West (11 per cent), North East (10 per cent) and Cumbria, and the Midlands (four per cent) saw the biggest falls. Yorkshire (three per cent), the South East (one per cent), and the South and South Wales (one per cent), all saw marginal increases in purchase approvals.