Mortgage insurance provider Genworth said that the large recent increases in mortgage lending to first-time buyers were a result of smaller building societies taking out insurance.

It said that Hanley Economic Building Society had increased its gross lending by 14% and lending to first-time buyers by 17% in the last year.

Many other regional lenders, including Monmouthshire Building Society, use mortgage insurance to allow them to make more loans.

Genworth’s vice president of mortgage insurance Simon Crone said that mutual organisations were now able to out-manoeuvre banks.

“Utilising mortgage insurance for their higher LTV mortgage offerings has certainly enabled them to steal a march on some of the larger lenders,” he said.

“No-one is suggesting lenders return to the sort of reckless practices that saw mortgages offered at 100% of the property’s value and beyond, but 90% and 95% home loans are vital if first-time buyer activity is to continue to track upwards.

“Now the property market has started to pick up, deposit requirements will only become more onerous, so it is imperative that lenders keep pace with this and offer mortgages that reflect the situation.

David Lownds, head of operations at The Hanley Building Society, added:

“We have an appetite and a responsibility to lend to first-time buyers and with the benefit of competitive mortgage insurance, we are able to do so within our risk tolerance.

“The first-time buyer market has traditionally been a market that building societies do well in and I’m delighted that we are doing our share of meeting first-time buyers’ aspirations to help get them onto the property ladder.”