Although first time buyers haven’t had very much to be thankful for in recent years, this might be changing. A survey carried out by the Bank of England has found that lenders will be more likely to make mortgages available to people who have a smaller deposit during the first 3 months of 2013.
Scheme fuelling change
At the end of last year there was reportedly a significantly higher chance that households could receive secured credit. It isn’t just first time buyers that are expected to benefit though, as anyone seeking a mortgage has a greater chance of finding a more competitive rate. The explanation for the increase in mortgage availability was in part due to the £80billion Funding for Lending Scheme, which was designed by the Government to encourage banks to increase lending through the provision of cheap finance, allowing mortgage rates to be reduced and therefore more people to obtain a mortgage. However, it is also thought to have been boosted by a relaxation of the conditions for wholesale funding and that lenders are keen to increase their share of the market.
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Although increased lending might have been expected for those with a loan to value of less than 75%, a larger increase in lending is expected in those with higher loan to value – a rise in lending of 29% is anticipated in the former compared with 33.6% in the latter. As a result the proportion of mortgage applications that will be approved is expected to increase during the first three months of 2013. This had already started to increase during the last quarter of 2012, with 1,774 more approved in December than had been in November. Not just this, but the number of first time buyers had also started to increase and was up by 8% between October and November; 21,700 first time buyers had loans approved, which was the highest number during the last three years and only the end of the stamp duty holiday boosted the number of first time buyers seen in March 2012.
However, some lenders reported that they would be slightly stricter on their criteria for credit scoring, ensuring that increased lending took risk into consideration. Some first time buyers may therefore be left disappointed, facing yet another year in rented accommodation. This is not good news for them, but will mean that the supply of tenants for buy-to-let landlords is not yet about to dry up; indeed an increase in investment in property through the use of buy-to-let mortgages is expected during the course of 2013.