First-time buyers gain from credit easing scheme
First-time buyers are set to benefit from a Bank of England decision to pump £80 million into the financial system.
The joint initiative with the Treasury was announced by the bank’s governor, Mervyn King, at the annual Mansion House speech last night.
Lenders will be given access to newly created funds at below market rates on condition that they pass on the benefits.
The aim is to encourage banks to lend to businesses and consumers and Treasury officials believe this could support around £80 billion in new loans.
Douglas McWilliams, chief executive of the Centre for Economics and Business Research, said the scheme could boost commercial property and home mortgages.
‘By making mortgage lending more easily available, it will be possible for lenders to edge up loan to value ratios which could slash the deposits required from first-time buyers by as much as a quarter,’ he said.
This came on the same day the Council of Mortgage lenders released figures showing lending to first-time buyers had significantly dropped from March to April this year.
The CML said this was because of the end of the ‘stamp duty holiday’ in March. House buyers did not have to pay stamp duty on properties between £125,000 and £250,000 until this time.
There had been a surge of lending in March, the CML said, but purchases of properties between £125,000 and £250,000 fell by 70 per cent between March and April.
The figures show the total number of house purchase loans dropped by 30 per cent from March this year to 36,000 in April. Lending to home movers also fell by 15 per cent from March to 23,400 in April.
Paul Smee, director general of the CML, said: ‘April’s figures show the expected effect of the end of the stamp duty concession on UK mortgage lending.
‘Given the economic uncertainty, any significant pick up in lending in the coming months seems unlikely.’
Brian Murphy, head of lending at the Mortgage Advice Bureau, said: ‘Lenders have been tightening criteria and we saw an increase in both the size of average deposits being put down and in average incomes on applications, which is which is consistent with a drop in first-time buyers.’
Although, he added: ‘The market is still much stronger than it was this time last year and since then activity has begun to increase again.’