First-time buyer levels drop

The number of first-time buyers taking out mortgages has dropped in January after peaking in December, new research reveals.

Mortgages taken out by first-time buyers dropped by ten percentage points to 38 per cent Mortgages Direct's latest study finds.

The drop may be due to the surprise increase in base rate in January, which "knocked the confidence of the group" Mortgages Direct explained.

"As expected, the last interest rate rise has not been good news for first time buyers who are still having difficulty getting onto the property ladder," commented Peter Gladdy, director of Mortgages Direct.

He added: "Although the market is performing well, borrowers are showing signs of heightened sensitivity to changes in interest rates and speculation of a further rate rise in the first half of the year is making buyers and property investors think very carefully before committing to purchasing a property."

The study also finds the number of high loan to value mortgages hit a 12-month low in January, reaching eight per cent after making up 13 per cent of new mortgages in December.

This decrease is a result of first-time buyers pulling back and all other borrowers exercising caution in the wake of the rate rise, Mortgages Direct said.

The most popular choice of mortgage were two-year fixed-rates, an indicator of homeowner's confidence that the recent rises in interest rates will be short-lived.