First-time Buyer  

Cheap rates see mortgage costs reach historic low

The amount borrowers are paying as a percentage of their household income to service capital and interest rates reached a historic low in September.

For both first-time buyers and home movers the percentage of their household income to service capital and interest rates was 17.8 per cent and 17.7 per cent respectively.

Affordability metrics for first-time buyers saw the typical loan size decrease to £133,000 in September from £136,400 in August. 

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The average household income also decreased slightly from £41,000 in August to £40,200 in September. 

This meant the income multiple was slightly down from 3.56 to 3.53.

The average amount borrowed by home movers in the UK also decreased to £171,000 in September from £175,000 in August, while the average home mover household income also decreased to £55,100 from £55,400. 

The income multiple for the average home mover went from 3.27 to 3.26 month-on-month.

Number of loans for house purchase and remortgage in September     
 House purchaseRemortgage
 FTBsMoversBuy-to-letHome ownersBuy-to-let
1 month change-0.90%-8.20%-1.50%-10.00%-10.20%
12 month change12.50%-5.10%-42.30%2.30%-8.00%

While there was a decline in house purchase lending in September compared to a month before, this was the highest volume of loans and most amount borrowed in the month of September since September 2007.

This was mirrored in first-time buyer trends as this was the highest volume of loans in the month of September since September 2006.

On a seasonally adjusted basis, most lending trends were relatively similar. 

Gross buy-to-let lending declined in September compared to August and remained down on year earlier levels but, on a quarterly basis, lending went up in the third quarter compared to the second quarter. 

Nearly two thirds of buy-to-let loans were remortgages rather than house purchase.

Paul Smee, director general of the Council of Mortgage Lenders, said: “Mortgage affordability reached an historic low in September, for both first-time buyers and home movers, which partly reflects the re-pricing of mortgages following August’s base rate cut. 

“This should help turn strong appetite for home-ownership into a reality as we approach the closing months of the year.   

“Six months on since the stamp duty changes on second properties and buy-to-let continues to operate at lower levels than a year ago. But lending for buy-to-let house purchase and remortgaging has settled at its current level over the last four months.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said the flurry in cheap mortgage products looks unlikely to change anytime soon.

However, he said there is a potential blot on the horizon for borrowers in the form of rising Swap rates. 

Mr Harris said: “This may feed through to higher mortgage rates in the short term, although the dip in inflation yesterday may lead to another fall in Swaps. 

“The advice to borrowers who have their eye on a cheap rate is to secure it while they can - they are so low anyway, it is unlikely to be a move you will regret.”