The number of loans to first-time buyers hit a two-year high in December 2009, driven by a rush to buy properties in the £125,000 - £175,000 bracket before the year-end stamp duty concession expired, according to figures released today by the Council of Mortgage Lenders (CML).

The CML has also published new analysis showing how affordability, especially for first-time buyers, is complicated by the effect of low interest rates when capital repayments are taken into account.

December saw 24,900 loans to first-time buyers, the highest number since November 2007. At £2.9 billion, first-time buyer loans rose 26% from November both by volume and value.

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55% of house purchase loans were on properties costing under £175,000 and therefore exempt from stamp duty, up from 51% in November. 10,300 first-time buyers and 11,200 home movers bought a property of between £125,000 and £175,000 in December, up 63% from 6,300 and 49% from 7,500 respectively from November. This clearly indicates a rush to complete purchases before January, when stamp duty would have added an additional 1% of the purchase price onto the transaction costs.

Bob Pannell, Author of the research, said: "With 90% of loans advanced in December being repayment mortgages, it would seem appropriate to take capital payments into account when assessing affordability.

"Typical capital and interest payments for a recent first-time buyer would represent about 21% of pre-tax income. This is considerably more than the 14-15% that mortgage interest costs alone would be, and demonstrates why using initial mortgage interest costs to assess affordability risks giving an overly flattering picture."

(CD/GK)