Despite being faced with one of the most challenging economic environments, mortgage lending to first time buyers is bucking the trend. Mortgages given to new applicants this year has increased by over 10% compared to 2011, representing the first year-on-year rise in issues home loans since the third quarter of 2006.
Figures recently compiled by leading financial institutes record a 10.4% jump in the amount of first time buyer mortgages being issued for the July-September period between 2011 and 2012. More encouraging for the market is the quarter on quarter gains this year for lenders in the first time buyer market. Lending to first time applicants this quarter has increased by almost 25% on the previous quarter this year.
This quarter, 3,983 mortgages with a total value of €663 million were issued to first time buyers. In total, the number of fresh mortgages given out to date is just under the 10,000 mark. Unsurprising then that experts in the field are welcoming this current upward trend in business and have expressed measured optimism that it can be sustained going forward.
However, keeping this level of activity going could encounter difficulties. Most notable is the current availability of the mortgage interest relief scheme due to finish at the end of the year. The scheme gives first time buyers a reduction of up to 25% on the cost of monthly repayments provided they complete the draw down process before the 31st December 2012 deadline.
Removing the tax relief initiative could have a downward effect on mortgage demand as it is difficult to determine how much of a boost the scheme has given to figures. In addition, the prospect of banks announcing more interest hikes on their variable mortgage rates could act as a further deterrent for people to consider buying.