The number of mortgages approved in the UK hit an almost five-year high in January, with loans to first-time buyers also reaching their highest level since 2008. The data from chartered surveyors e.surv has given the strongest sign yet that the UK's struggling mortgage market is beginning to turn a corner after five stagnant years.
The figures from e.surv show that mortgage approvals increased from 55,785 in December 2012 to 65,184 in January 2013, equivalent to a 17% rise. This made January the strongest month for house purchase lending since February 2008 and a 13% improvement on January 2012.
"After an inauspicious start last autumn, Funding for Lending has come good," says Richard Sexton, business development director of e.surv. "It has flooded lenders' balance sheets with cheaper funds which has encouraged them to reduce mortgage rates to record lows and roll out a much wider range of mortgages for high loan-to-value borrowers. It is helping clear the logjam in the first-time buyer market."
High loan-to-value mortgages - to borrowers with a deposit of less than 15% - also hit a five-year high. These deals are the most popular with first-time buyers and increased by a third between December 2012 and January 2013. E.surv's Mortgage Monitor found that there were 7,758 loans at 85% or more - the highest since February 2008.
"These figures show that first-time buyers are finally returning to the mortgage market in significant numbers," says Keith Osborne, editor whathouse.co.uk. "Government intervention has resulted in a wider choice of cheaper mortgage deals which is helping first-time buyers onto the property ladder."
Research from the financial analyst Moneyfacts has found that the government's Funding for Lending scheme is having a significant impact on the price of mortgage deals. They report that the cost of five- and two-year fixed-rate loans are now at the lowest level since its records began.
Over just the past month, borrowers with 30% equity in their home have seen rates fall from 4.41% to 4.29% on two-year fixed-rate deals, while the rates on five-year mortgages dropped from 3.57% to 3.38%.
Osborne adds: "Considering January is a relatively quiet month, seeing mortgage approval numbers hit a five-year high is extremely encouraging. Considering mortgage rates are continuing to fall, I am optimistic that this improvement isn't just a blip."
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