The emergence of two classes of home buyer was confirmed yesterday, with a sharp rise in the number of mortgages approved by banks and building societies – but only to those able to raise a substantial deposit.
The Council of Mortgage Lenders (CML) said that 31,000 new home loans were granted in March, a 29 per cent jump on the figures for February. However the level is still a third lower than this time last year, itself a depressed time for the property market. Access to credit for homebuyers and businesses remains constrained by the banks' reluctance to lend to any but the safest of candidates.
The CML's head of research, Bob Pannell, said: "Because the flow of lending is still constrained, there is a sharp dividing line in the housing and mortgage markets between those who can raise a substantial deposit and those who can't." Typically a deposit of 25 per cent is now required from first-time buyers and a multiple of three times earnings offered, compared with the 11 per cent deposit and a ratio of 3.35 prevailing this time last year.
For those able to raise the funds for a large deposit, conditions are relatively promising, thanks to the fall in house prices and lower interest rates. The CML said that the cost of paying the interest on a home loan was at its lowest level since 2004; 12,500 first-time buyers took out a mortgage during March – 40 per cent of all loans, the highest proportion since April 2005.
Peter Bolton King, the chief executive of the National Association of Estate Agents, added: "First-time buyers believe that there are bargains to be had and confidence is returning to the market. The lenders must be responsible rather than draconian; the property market must demonstrate that it is responsible by embracing calls for agents to be licensed; and the Government should admit responsibility for damaging schemes such as stamp duty, and scrap them."