First-time buyers are continuing to face difficulties in entering the housing market because of affordability constraints, according to the Council of Mortgage Lenders.

First-time buyers dwindling

Latest figures from the Survey of Mortgage Lenders show that only 30,000 first-time buyers entered the market in June, compared with 48,000 in June last year. They accounted for only 29% of all mortgage borrowers, compared with 44% in June last year.

Total gross advances in June reached an estimated £22.5 billion - up from £21.8 billion in May, and from £17.1 billion in June 2002. Remortgaging accounted for 46% of this total.

Fixed-rate mortgages rising

More than half of all mortgages taken out in June was at fixed rates. Fixed rate lending accounted for 53% of loans for house purchase and remortgages, and the average fixed rate was 4.19%. Variable rate lending accounted for 47% of lending, at an average rate of 4.06%.

High prices thwarting first-time buyers

"Despite very affordable mortgage rates, high house prices are making it difficult for first-time buyers to enter the market,” comments CML Director General Michael Coogan, “Only 174,000 first-time buyers entered the market in the first half of this year, compared with 253,000 in the first half of last year.”

"This is beginning to make it harder for sellers further up the chain to sell their properties,” Coogan continues. “This is one of the reasons why the CML expects the slowdown in momentum to continue, as lending discipline and affordability will constrain the potential for rapid house price growth. But lending potential remains extremely positive, not least because we expect remortgaging to remain strong.”

"Against this general backdrop, local housing markets vary widely. There will be many areas where house prices could continue to grow strongly and transactions remain robust, while other areas will be constrained by affordability problems. The same is true for different types of property. As ever, the average headline figures mask dramatic differences between different parts of the country."