High loan-to-value mortgages are getting cheaper, giving hope to first-time buyers as rent levels and average house prices continue to rise at pace with inflation.
According to financial analysts, Moneyfacts, the average two-year fixed-term mortgage for first-time buyers has fallen by almost a fifth – from 5.44% last year to 4.50%.
The average five-year fixed-term product has fallen by a slightly smaller proportion – from 5.65% last year to 4.83% today.
The best 85% mortgage listed on Which4U has fallen from 4.04% in December 2012 (Yorkshire BS) to just 3.49% this month (Principality BS), while 95% mortgages are now available from as little as 4.49% through NatWest’s 2-Year NewBuy mortgage.
The affordability of home loans has had a considerable impact on mortgage lending.
Gross mortgage lending rose by 4% in April on the previous month, to £12.1 billion, according to the Council of Mortgage Lenders (CML) – a rise of 21% over the last year.
“The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008,” said Bob Pannell, the CML’s chief economist.
Funding for Lending
The Funding for Lending Scheme, introduced in August last year, has improved conditions for aspiring homeowners, who now have a choice of 95% and 100% loan-to-value mortgages.
The boost to activity has had the inevitable result of adding pressure to prices, though first-time buyers appear to have been better insulated from this than the rest of the market.
Average property prices returned to mid-2008 levels, the Office of National Statistics said, following a 2.7% increase in the past year to reach £235,000 in March.
Prices in London rose by more than double the rate of inflation (7.6%) to reach an average of just under £400,000.
But average prices for first-time buyers in England rose by around half the rate of inflation (1.3%), reaching £175,000 in March.
Rental Market
This will come as some relief to aspiring homebuyers after a new Rent Check report by BDRC Continental and Allsop LLP said that 40% of landlords increased rental costs over the past year.
The performance in the rental sector is also driving demand in the property market, with over six in ten landlords expressing an interest in increasing their property portfolios.
Are you an aspiring homeowner? Are current conditions making it easier to afford a mortgage? Let us know!
Keith McDonald
Which4U Editor
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