Overall lending for buying homes in the UK gained much ground in the third quarter of 2014 compared to last year as the residential property market continued its recovery.
The latest figures from the Bank of England shows that the proportion of lending for house purchase was 71.8% of total residential loans to individuals, approximately 1.7% higher than in the second quarter of the year.
The figures also show that the amount of gross advances for house purchase was 20% higher compared with the third quarter of 2013 at £40.1 billion.
However, the proportion of lending to first time buyers decreased by 0.4% to 21.7% after reaching a peak in the second quarter of 2014. But the value of residential loans advanced to first time buyers increased over the quarter to £12.1 billion, the highest quarterly amount since the third quarter of 2007.
The proportion of gross advances at a loan to valuation (LTV) of over 90% decreased by 0.3% over the quarter to 4.3% while the proportion of gross advances to borrowers with a single income multiple of more than four times decreased by 1.1% to 10.8% after having increased for five quarters in succession.
The proportion of gross advances to borrowers with joint income multiple of more than three times decreased slightly by 0.2% quarter on quarter to 28.6%.
The proportion of gross advances that is a combination of an LTV over 90% and loan to income multiple of over 3.5 times for single income borrowers or 2.75 times for joint income borrowers, decreased over the quarter by 0.3% to 3.1%, having increased for the previous three successive quarters.
According to David Newnes, director of Your Move and Reeds Rains estate agents, initiatives like Help to Buy and higher LTV lending provided welcome relief for potential first time buyers combatting stagnant interest rates on their savings and underwhelming wage growth in their quest for a deposit.
But he warned that the loan to income caps could become a potential sticking point for first time buyers, and layers of mortgage regulation are threatening to further dampen demand for homes.
‘However, the government has extended an outstretched hand to aspiring buyers with last week’s stamp duty reform, which is a welcome gesture for the lower rungs of the housing ladder,’ he added.