Record Increase in Number of First-Time Buyers in July reflects saversí parting with 20% of their Monthly Income on Mortgage Repayments

Over 30,000 first-time buyers took out mortgages in July, the highest monthly figure since the outbreak of the financial crisis, expending 20% of their incomes in lieu of housing costs.

Fresh data gathered by the Council of Mortgage Lenders (CML) found that first time buyersí, who earn a mean of £38, 900 per month, was up by 0.4% for the second quarter of 2014 on the previous year. This increase in expenditure was mirrored by a 25% surge in mortgages taken out by first-time buyers in July on the same month in 2013.

The latest findings reflect borrowersí fearlessness in the face of an interest rate raise, and notwithstanding governmentís efforts to toughen up on lending rules, the loan-value ratio increased by 4% from June to July. These statistics have cast shadows over the efficacy of regulations set out in Aprilís Mortgage Market Review (MMR), and the subsequent Bank of Englandís auxiliary measures taken to further kerb reckless borrowing, as borrowersí seem unconcerned by the somewhat arcane budgetary strain expected to be faced by households in the coming months.

The effectiveness of the policymakersí reforms can be questioned further when the average amount of first-time home loans value is taken into consideration. Amounting to £127,500 up by almost £4000 on June, this figure is the greatest average size of a first-time buyer loan since records began.

ìBorrowers still need to be cautious about the level of borrowing they are taking on and not overstretch themselves,î warned Jonathan Harris, director of mortgage broker.

However, first-time buyers have been aided by various economic factors organically playing out; the governmentís flagship Help to Buy housing programme, designed specifically to help first time buyers in their attempt to clamber onto the slippery property ladder, for one has had a profound impact, with the treasury declaring last week that 82% of the 48,393 completed Help to Buy transactions were carried out by first-time buyers.

A scarcity of affordable housing ñ most notably in desirable locales, bottled up demand and a sustained period of economic growth have all meant that borrowing has organically increased in amount. Moreover, the current economic climate has allowed for thrifty parents to make sacrifices to prevent their children from enduring exorbitant prices in the private rental sector, in the form of capital acquired through the tripling in property value since the start of the 1990s ñ cash they appear content to forego if it means security for their offspring.

As such, the overall picture suggests that borrowers are content to take market conditions head on, with the data showing no signs of slowing on the part of lenders. This is made all the more startling  when BoE governor, Mark Carneyís comments at the TUC congress, whereby he warned the delegates that consumers can expect to face heftier mortgage repayments before tangible increases to real wages are seen.

However, there is some welcome news for those anxious over the potential overcooking of the housing market, with the Royal Institute of Chartered Surveyors (Rics) stating that house sales are taking an average of an extra month to complete. This, Rics says could be to some extent due to stricter regulations laid out in Aprilís MMR. This assertion is somewhat validated by the slowing of house price growth within the capital, with Londonís sellers increasingly willing to put their homes on the market whilst demand wanes due to already unaffordable house prices.

ìSome of the momentum has come out of the housing market of late reflecting in part concerns over a likely rise in the cost of borrowing at some point in the not too distant future,î said Simon Rubinsohn, top economist at RICS.

High levels of lending could also be curtailed by a yes vote in Scotlandís much talked about independence referendum, which could see lending come to a standstill in certain banks, most notably RBS who have state their intent to relocate south of the border if Scottish independence is realised.

Economist Howard Archer of IHS Insight said: ìWhile the CML data indicates that the housing market is currently seeing steady growth, the bulk of the evidence indicates that activity has lost some momentum compared with the earlier months of this year, including the Rics survey for August that came out overnight. It reported a second consecutive drop in buyer inquiries and that agreed sales had fallen for the first time since September 2012.î

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