MORTGAGE lending to first-time buyers increased to its strongest level since 2007 in May despite the introduction of stricter rules around the way home loans are handed out, figures from banks and building societies show.
First-time buyers took out 26,800 mortgages worth a collective £3.9 billion in May, marking the biggest number of loans advanced to people taking their first step on the property ladder since November 2007, according to data from the Council of Mortgage Lenders (CML).
The typical first-time buyer now requires a 16 per cent deposit, which is the lowest average deposit share needed since 2008. The average loan size of a first-time buyer loan also lifted to a new peak of £123,200 in May, edging up from a figure of £121,500 in April which had also been a record high.
By value, lending to first-time buyers is up by 30 per cent compared with May 2013 as well as an 11 per cent increase compared with April this year.
At the end of April, a mortgage lending clampdown was introduced across the industry with the aim of preventing any return to irresponsible lending.
The rules, introduced under the Mortgage Market Review (MMR), force lenders to ask home buyers and people looking to remortgage more detailed questions about their spending habits.
Lenders also have to apply "stress tests" to make sure a loan would still be affordable as and when interest rates rise, often applying a theoretical mortgage rate of seven per cent.
The CML's figures show that first-time buyers taking out mortgages in May this year were stretching their borrowing harder than those taking out a loan a year earlier.
People climbing on to the first rung of the property ladder are typically borrowing 3.43 times their gross income, compared with an average loan-to-income multiple of 3.29 a year ago.
The CML said that the low interest rate environment means that borrowers' payment burdens remain "relatively low", taking 19.5 per cent of their gross income.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article