If there was ever any doubt about the popularity of the stamp duty holiday, we need only look at gross lending figures for March. CML figures show a 57 per cent surge in lending activity as first-time buyers pushed their purchases through in time to take advantage of the valuable concession. More generally, there was a 74 per cent increase in loans granted compared with the previous month. At If I Were You, our own results indicate a steady and consistent increase in purchase enquiries from January onwards, spiking in mid-March.
The increase in activity acted as a catalyst and we saw property chain logjams loosen up, allowing homemovers to push forward with the sale of their property. It just proves that when the first-time buyer cog begins to turn smoothly, it benefits the whole mortgage machine and property transaction market.
To encourage sustainable first-time buyer activity, our sector must do everything we can to support new lending initiatives. It is no secret that the requirement for bigger deposits is the principal hurdle holding back prospective buyers.
The Government’s NewBuy scheme for example, which offers 95 per cent mortgages, is one of a few initiatives aimed at creating first-time-buyer entry. The Bellway Group, one of the UK’s biggest housebuilders, reported the scheme had contributed 90 reservations in the 11 weeks since its launch, despite views from the mortgage intermediary market, including mine in earlier editions of this column, that NewBuy is highly limited.
The longer-term success of this particular initiative will depend on the approach of lenders to mortgage rates and credit-scoring policy and, in that context, it will be some months before we are able to determine whether NewBuy will have any significant and incremental effect on transaction volumes.
Our sector also has a responsibility to educate prospective buyers about some of the positive aspects of the current economic climate and to explain that some opportunities will not last forever.
Only last week we saw headlines about the good news statistics released by The Consumer Credit Counselling Service.
The figures suggested the number of young homeowners in mortgage arrears in their 20s has almost halved over the past two years.
The CCCS said low interest rates had meant the typical monthly mortgage payments for those in their 20s had gone down from £543 in 2009 to £471 in 2011. Average mortgage payments for new borrowers stood at 27 per cent of disposable earnings in the fourth quarter of 2011, the lowest share since spring 1997 when a 26 per cent proportion was recorded and well below the 37 per cent average over the past 27 years.
At If I Were You, we are working hard at spreading that message to the thousands of people we engage with each month.
CCCS director of external affairs Delroy Corinaldi says: “Many young adults are struggling to get into the property market but the outlook is more positive for those who are already in it.”
This is a welcome truth, provided that we continue to see rate stability.
Rob Clifford is chief executive at If I Were You