Nationwide boosts first-time buyer lending

Tim Ireland/PA

Nationwide Building Society has announced a sharp rise in mortgage lending in the last year as the provider proves its commitment to helping more first-time buyers onto the property ladder.

So how does Nationwide's lending compare to the market as a whole and how does the outlook fare for first time buyers?

Gross mortgage lending at Nationwide was 44% higher for the year to 4 April than for the previous year, with £18.4bn lent, according to figures released by the building society this week. It also claims to have helped 24,000 buyers buy their first home, an increase of 9% on the year before.

Indeed mortgage lending throughout the market has risen in recent months, before slowing considerably in April. Figures form the Council of Mortgage Lenders show that lending in April fell by 19% from £12.6 billion in March, but was 2% higher than the total of £10.0 billion in April 2011.

Underlying cause
CML chief economist Bob Pannell said: "Mortgage lending activity has been relatively buoyant in recent months, with stronger lending for house purchase underpinning the more upbeat lending picture.

"The underlying picture is likely to be a bit stronger than the April figure suggests, because some first-time buyers are likely to have brought forward their transactions to March to take advantage of the stamp duty concession that was coming to an end."

Indeed, the end of the stamp duty concession led to a surge in activity in the mortgage market with first-time buyers taking out 24,000 loans in March. This was an increase of 74% compared to February and 57% higher than March 2011. This hike meant first-time buyers accounted for 42% of total house purchase loans, the highest proportion since 2001.

Eurozone crisis
Yet while a drop in activity was expected in the months following March, this is now likely to be compounded by issues in the Eurozone.

"Eurozone developments are highly uncertain and have the potential to undermine UK economic prospects and conditions in our housing and mortgage markets," adds Pannell.

Mark Harris, chief executive of mortgage broker SPF Private Clients, says that problems in the Eurozone will lead to less funding available across the board, which will inevitably affect first-time buyers.

"The sad fact is that when lenders pull back on their lending, they tend to favour low-risk borrowers over higher risk, which means those with large deposits of 25 or even 40%. This rules out most first-time buyers who tend to have much more modest down payments."

Limited options
While conditions are likely to get tougher for first-time buyers to secure finances, there are still options available at 90% loan-to-value and a few at 95%.

"However, it remains the case that if you have a bigger deposit to put down you will be able to access more competitive rates," explains Harris. "For example, if you have a 5% deposit you can get a five-year fix from Leeds BS for 5.99%, considerably higher than the 3.89% available from the Post Office for those with a 25% deposit. On a £150,000 mortgage, this makes a difference of £183 per month in your mortgage payments."

Harris adds: "With mortgage rates edging up across the board, even though interest rates are unlikely to rise for a couple of years at least, if you are thinking of taking out a mortgage it may be better to secure the rate sooner rather than later."
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