Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email [email protected] to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found here.
© Bloomberg Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) 3 Save YESTERDAY by: James Pickford First-time buyers are sharply improving their success rates when applying for a mortgage, according to research that suggests intense competition between lenders is making it easier for borrowers to access loans. More than two-thirds (67 per cent) of mortgage applications made by first-time buyers were completed in the first three months of 2017, up from less than half (48 per cent) a year earlier. The quarterly research by the Intermediary Mortgage Lenders Association (IMLA) looked at mortgage applicants’ interactions with brokers from the first point of contact to completion of a loan. It found that 84 per cent of applications by first-time buyers resulted in a mortgage offer, up from 70 per cent in the first three months of 2016. The ratio of completions by first-time buyers has improved more than that of any other segment of applicants, such as home movers, remortgage applicants and buy-to-let borrowers. Peter Williams, IMLA executive director, said: “First-time buyers’ struggles have been highly publicised, with affordability stretched by rising house prices and modest income growth. However, rising levels of mortgage inquiries, applications and completions shows that a significant number of first-time buyers are still both willing and able to get a foot on the property ladder.” “Low mortgage rates have contributed to this improving outlook for first-time mortgage borrowers.” David Hollingworth, director at broker London & Country Mortgages, said the cooling of the buy-to-let market following fiscal and regulatory pressure was likely to be another factor favouring first-time buyers. “The first-time buyer numbers do look healthy and that has come at the same time that buy-to-let has looked far less healthy. More first-time buyers are reaching completion because they’re not having to compete so hard with landlords. If they do have to pull out it’s more likely there’s another property available for them to purchase,” he said. First-time buyers have also been helped by the ready availability of higher loan-to-value mortgages, which require them to put down less money in the form of a deposit. There are now more than 250 mortgage deals available to borrowers with a deposit of just 5 per cent of the value of the home, according to figures in May from finance website Moneyfacts — though the interest rates on such mortgages are substantially higher than those offered to borrowers with bigger deposits. First-time buyers may struggle to qualify for a cheap mortgage, however. Tougher affordability tests imposed by the regulator in 2014 have constrained the numbers of first-time buyers able to purchase, Mr Hollingworth said. Mortgage rates have fallen further on some deals in the past year. Last week, HSBC cut the rate on a two-year fixed-rate mortgage to 1.34 per cent for those with a 15 per cent deposit. Competition has also brought new participants into the market. In April, Sainsbury’s became the latest supermarket to offer mortgages, with fixed-rate deals offered to those with deposits of at least 10 per cent and a reward scheme for borrowers who also shop at its supermarkets.