London first time buyer lending at five year high

Robyn Hall

August 28, 2013

During the second quarter of 2013 first-time buyers accounted for 11,200 loans for house purchase in London, the largest quarterly number since the end of 2007.

Figures from the second quarter also show that first-time buyers in London make up a larger proportion of house purchase loans compared to the UK overall (56% compared to 46%).

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “First-time buyer lending in London has rocketed to its highest level in over five years, up by 38% from the same period in 2012.

“The figures are positive news for the capital’s consumers, as access to the property market is clearly improving despite warnings of an impending housing bubble.”

Typical loan amounts have also increased, a knock-on effect of strong house price growth in the capital, up 6.9% in the second quarter compared to 2.9% for the UK overall.

This results in a larger growth in the value of lending to first-time buyers. Some £2,490m was advanced to these borrowers in the second quarter, a 33% increase on the first quarter of 2013 and up 47% compared to the second quarter last year.

Total house purchase lending in London was also boosted by the increase in lending to first-time buyers and showed an increase of 16% compared to the first quarter and 18% compared to the second quarter of 2012.

There were 20,100 house purchase loans advanced in London worth £5.1bn in total, a 23% rise in value compared to the first quarter of 2013 and up by 20% compared to the second quarter last year.

Whilst first-time buyers took out larger loans (on average £192,600 compared to £183,900 in the second quarter last year) the affordability was almost unchanged thanks to higher incomes and falling interest rates.

This meant on average first-time buyers spent 20.8% of their income on mortgage payments almost unchanged from 21% in the first quarter of 2013.

Affordability in London does however remain tighter than in the UK overall with first-time buyers borrowing an average of 3.67 times their income compared to 3.30 for the UK overall in the second quarter.

This may be why first-time buyers in London are generally putting down larger deposits than in the rest of the UK.

The average loan to value remains at 75% in London compared to 80% for the rest of the UK. In addition, incomes of first-time buyers in London are higher than in the rest of the UK – on average £52,100 per annum compared to £35,400 in the UK overall.

Home mover lending in London has been less strong compared to first-time buyers in the second quarter of 2013 but there has still been growth. In total, 8,900 loans worth £2.6bn were advanced to home movers in London which was an increase of 11% compared to quarter one and a 14% increase in value of the loans.

This however is a smaller growth on the second quarter of 2012 representing a 1% fall in the number of loans compared to a year ago but a 2% increase in value.

After a year of subdued activity, remortgage lending in London has started to show some growth as seen in the UK overall. There was £2.4 billion advanced to borrowers remortgaging their houses in the second quarter of 2013, which was up by 31% compared to the first quarter and an increase of 14% compared to the second quarter of 2012.

Paul Smee, director general of the CML, said: “Mortgage lending in London has followed a similar pattern to the rest of the UK with strong house purchase activity this quarter, strengthened particularly by first-time buyer activity.

“Total lending for house purchase has also increased this quarter upon last and from a year ago which suggests increasing confidence that economic conditions are becoming more favourable.”

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