The Bank of England Mortgage and Financial Conduct Authority Lending Statistics showed advances to first-time buyers increased by £2.7bn over the past year to £9.9bn, a 37% rise and the highest quarterly amount since quarter four 2007.
Historically low interest rates and cheaper funds for lenders have had a hand in paving the way for new property owners to realise their dreams of getting on the first rung of the housing ladder.
The overall average interest rate on gross advances continued its downward trend falling by 15bps in Q3 2013 to 3.32%, the lowest interest rate recorded since the series began in 2007.
This was driven by fixed rate loan average rates decreasing by 18bps to 3.40% and variable rate loan average rates decreasing by 7bps to 3.07%.
Fixed rate mortgages remained the most popular product choice accounting for 77.3% of overall gross advances in Q3, the fourth successive rise in fixed rate products.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “More borrowers are opting for fixed-rate mortgages which is no surprise as these are pegged at their lowest levels since 2007 when the Bank of England series began.
“Despite fears that the repositioning of Funding for Lending Scheme monies away from individuals and towards businesses next year will mean higher mortgage rates we are not convinced this will happen straightaway. “Some lenders still have FLS monies drawn but not yet utilised while many have aggressive targets for Q1 which means mortgage rates should stay low at least for the short term.”
Despite the rise in first-time buyer activity the proportion of gross advances over 90% loan to value decreased from 2.5% in Q2 2013 to 2.2% in Q3 2013.
But even though borrowers are putting down larger deposits income multiples continued to rise as house prices began to recover across the UK led by a strong recovery in London and the South East.
The proportion of gross advances to high single income multiple borrowers, more than four times income, increased in Q3 2013 by 0.3% to 10.5% compared with Q2 2013.
And the proportion of gross advances to high joint income multiple borrowers, more than three times income, also increased in Q3 2013 by 2.4% to 27.2%, the highest since the series began in 2007.
Overall the proportion of new lending at a combination of high LTV and high income multiple fell back to 1.3%, the same level as Q1 2013.