Scottish Property Market Sees Boost In Lending To First Time Buyers

The number of loans advanced to first time buyers increased again in the third quarter of this year, according to new figures released today (Monday 26 November) by the Council of Mortgage Lenders in Scotland.

There were 5,100 loans advanced to first time buyers in the third quarter, a 6% increase compared to the second quarter and up by 9% on the same period last year, the highest number of first time buyers in nearly three years.

This represented the third successive quarter of growth but below the rate of growth shown in the rest of the UK at 16%.

By value, first time buyers in Scotland borrowed 460 million, up from ã450 million in the previous quarter and 440 million in the third quarter of last year. As in the UK overall, first time buyers typically borrowed 80% of their property value , a figure largely unchanged in the last 18 months.

The percentage of income spent on mortgage payments by first time buyers in Scotland also remained stable at 17.8%, spending less of their income than in the UK overall which is 20.1%.

The figures also show that first time buyers typically borrowed 2.83 times their income, lower than the 3.25 in the UK, and reflecting the lower house prices in Scotland.

A total of 3,200 first time buyers bought a property under ã125,000 in the third quarter, falling below the stamp duty threshold, and representing 63% of all loans to first time buyers compared to 39% in the UK.

While there was an increase in lending to first time buyers in Scotland, there was a slight fall in lending to home movers in the third quarter. There were 7,400 loans advanced to home movers, a 3% fall compared to the third quarter and down by 6% on the same period last year.

By value, home movers borrowed 1 billion in the third quarter of 2012, down from ã1.01 billion in the previous quarter and 1.05 billion in the same quarter of 2011. In contrast, the number of loans taken out by home movers in the UK in the third quarter rose by 12%.

The increase in first time buyers and slight fall in home movers led to a small increase in the total number of house purchase loans advanced in the third quarter. A total of 12,500 house purchase loans were advanced worth ã1,460 million, up by 1% compared to the second quarter, but down by 1% on the same period in 2011.

While the number of loans increased, the value of loans remained the same as in the second quarter at 1,460 million.

Compared to the rest of the UK, loans for house purchase exhibited a weaker rate of growth, where house purchase lending increased by 13%.

As in the UK overall, there was a fall in remortgage lending in Scotland compared to both the previous quarter and the third quarter of 2011. A total of ã670 million was advanced to borrowers remortgaging, down from 740 million in the last quarter and a 28% fall compared to the ã930 million advanced this time last year.

The boost in first time buyers is encouraging but the rest of the market still remains broadly flat. The Funding for Lending scheme is likely to assist with growth going forward and we welcome the MI New Home scheme, enabling people to access higher loan to value mortgages on new build properties. But itђs still too early to see any meaningful effects flowing into the market as yet, said Iain Malloch, chair of CML Scotland.