More first-time buyers than thought
Wednesday, 15 February 2006 12:00
It appears that rumours of the demise of the first-time buyer may have been exaggerated.
The Council of Mortgage Lenders (CML) has revealed today that there are both more first-time buyers coming onto the market than previously thought, and that these are younger than the old data showed.
Using its new regulated mortgage survey (RMS), which replaces the old survey of mortgage lenders (SML), the CML reveals that first-time buyers made up 38 per cent of people moving home in the last three months of 2005, at an average age of 29.
The new RMS data covers about 90 per cent of the mortgage market and provides much higher quality data than the old SML, the industry body points out.
"The RMS highlights many important changes from our previously reported figures - most notable is the large increase in the reported number of first-time buyers," said CML director general Michael Coogan.
However, he was quick to point out that there has not actually been a rise in first-time buyers - simply that the old measuring system under-represented them.
"This [increase in numbers] reflects the more robust data, and not an actual increase in first-time buyer numbers," Mr Coogan said.
But the higher number of first-time buyers is just one of the aspects of the mortgage market that this new recording system sheds light on.
Fixed-rate mortgages also appear to have increased dramatically, with fixed-rate deals making up 76 per cent of all lending in the fourth quarter of 2005, up from 68 per cent in the third quarter and 56 per cent in the second quarter.
"The huge increase in the popularity of fixed-rate products is also striking. The combination of interest rate rises in recent years with modest increases in arrears and possessions has alerted people to the long-term security of fixed-rate products," Mr Coogan explained.
"This is encouraging as it shows people are planning ahead to avoid financial difficulty should rates rise in the future."
The new recording system in detail
The regulated mortgage survey (RMS) uses statutory product sales data and has far wider market coverage than the old survey of mortgage lenders (SML) - some 90 per cent coverage as opposed to 50 per cent.
Additionally, the data is - in the CML's words - "more robust".
The major differences between the findings of the SML and the RMS are:
- Total lending for house purchase is lower than previously estimated
- Loans to first-time buyers are significantly higher
- Typical loans to purchase price ratios are slightly higher and income multiples lower
- Average loan sizes are higher, particularly for movers and remortgagers
- Volumes of fixed-rate lending are higher, and non-discounted variable-rate leading lower
- Fewer loans are taken out on a capital-plus-interest basis, and more are interest only
- Scotland has lower lending volumes
To find a cheap UK mortgage, go to www.myfinances.co.uk/mortgages.htm
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