First-time buyer deposits hit £26k
Mortgage approvals for first-time buyers rose by 41% over the year to February, according to the Council of Mortgage Lenders (CML).
There were 22,200 new homeowners in February, up by 2.3% compared to the previous month.
With a typical loan size of £119,000 and an average loan to value of 82%, first-timers were putting down a deposit of more than £26,000 and typically had to borrow 3.4 times their salary to get on to the first rung of the property ladder.
During the month, first-time buyers spent 19.2% of their gross income to cover the capital and interest payments on their mortgage - only slightly higher than the lowest level of 19.1% ever recorded in April 2012, April 2013 and November 2013.
The amount of borrowing needed in February fell slightly from £119,735 in January, when an income multiple of 3.4 was needed. This put the typical income of a first-time buyer at £35,297 in February and £36,408 in January.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "The number of first-time buyers increased substantially compared to February last year, demonstrating not only the importance of Help to Buy but also the appetite of lenders more generally to lend at higher loan-to-values.
Property prices rise
As property prices continue to rise, mainly in London but increasingly beyond, this will be increasingly important in enabling borrowers to keep up and get the mortgages they need.
He added that while the introduction of tougher lending criteria over the next few weeks may have slowed some applications and approvals down, this should soon improve.
"Processing times for mortgage applications are likely to increase as a more forensic approach to expenditure is adopted but it should result in a more sustainable mortgage market that works better for consumers and lenders."
Overall mortgage lending in February dipped by just 100 loans to 48,400 compared to January - due to seasonal factors, said the CML, but year-on-year there was a 33% increase in volume.
The number of remortgages was also up over 12 months, by 17% compared to February 2013. And the number of but-to-let mortgages rose by 46% over the same period.
George Spencer, chief executive of lettings agent Rentify, said: "Buy-to-let goes from strength to strength with nearly a 50% uplift in the volume of lending compared with the same month last year."
He added: "Cheap mortgage rates and an increase in appetite among lenders are playing a part but it also shows that landlords being more savvy with their money, keen not to pay over the odds for advertising, letting and property management services.
"The Budget changes to annuities should further boost the buy-to-let sector with more pensioners choosing property as an alternative to pensions in retirement."
Loan to value
The LTV shows how much of a property is being financed and is also a way to tell how much equity you have in a property. The higher the LTV ratio the greater the risk for the lender, so borrowers with small deposits or not much equity in the property will be charged higher interest rates than borrowers with large deposits. The LTV ratio is calculated by dividing the loan value by the property value and then multiplying by 100. For example, a £140,000 loan on a £200,000 property is a LTV of 70%.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.