According to the Council of Mortgage Lenders, October’s mortgage lending figures give some insight into the changing trends of the first time buyer market.
The statistics showed that the average first-time buyer (FTB) needed to find a smaller deposit to secure a mortgage, with the figure shrinking from 24 percent in September to 20 percent in October.
The new buyers also seemed to move away from interest-only deals, although it was not clear whether this was due to a lack of interest or whether they were not being offered such deals. The Council of Mortgage Lenders (CML) believes the change is largely due to mortgage lenders choosing to withdraw the offer of interest only loans in expectation of the regulators advising lenders to be more cautious with mortgages.
October 2010 showed that 93 percent of FTBs opted for a repayment style mortgage, where both the interest and the capital is repaid each month. Since the start of records back in 1974, this percentage is the highest it has ever been.
Prior to the credit crunch in 2007, around 30 percent of FTBs took out interest-only mortgages.
A spokesperson for the CML stated:
“The shift shows lenders have been adjusting their loan criteria in anticipation of possible regulatory changes, and a recognition that repayment mortgages may be in the best interests of less experienced borrowers such as first-time buyers.”
In a BBC article, a mortgage broker spokesperson added that as mortgage lenders altered their lending policies to ensure responsible lending, this would mean many buyers would struggle to secure an interest only mortgage.