London first-time buyers borrowed 27% more in the second quarter than a year ago.
New Council of Mortgage Lenders (CML) data shows lending in Greater London in the second quarter of 2014 show the market grew in both house purchase and re-mortgage activity compared to the previous quarter and the same period last year.
First-time buyer loans totalled 12,300 in the second quarter in London – 4% up on the previous quarter, and 17% up on Q2 2013. First-time buyers in the period borrowed £3 billion – up 10% on the previous quarter and 27% on Q2 2013.
There were 9,000 home-mover loans in the second quarter, up 1% on the previous quarter and 7% on Q2 2013. Total value of these loans was £3 billion, up 9% on the first quarter and 26% on the second quarter 2013.
Re-mortgage lending in the quarter showed growth in London compared to the previous quarter and the same quarter in 2013.
Lending for home-owner house purchase
House purchase lending to home-buyers increased quarter-on-quarter in London totalling 21,300 loans. This is up 3% compared to the first quarter and the value of these loans totalled £6 billion, a rise of 9% on the first quarter. Compared to the second quarter of 2013, the number of loans increased 13% and the value of these loans increased by 27%.
Lending to first-time buyers
First-time buyers typically borrowed 3.90 times their gross income, more than the 3.83 in the previous quarter and the UK average of 3.46.
The typical loan size for first-time buyers was £212,000 in the second quarter, up from £200,000 in the previous quarter. The typical gross income of a first-time buyer household was £55,000 compared to £52,500 in the first quarter.
Due to the higher house prices in London compared to the UK overall, there was a continued shift in the mix of properties bought by first-time buyers towards more expensive properties.
In the second quarter, 63% of first-time buyers bought properties priced at more than £250k, up from 57% in the first quarter and 51% in the same period last year. This was significantly higher than the UK overall level of 17%.
First-time buyers in London have tended to put down larger deposits than in the UK – there was a period in 2009 and 2010 when there was no difference and typical deposits increased to 25% in London and in the UK, but whereas in the UK the typical loan-to-value has drifted up to 80%, in London it has remained at 75%.
In the second quarter, first-time buyers paid 21.1% of gross monthly income towards capital and interest payments, a higher proportion of income than 20.7% in the first quarter.
Paul Smee, CML director general, commented:
“It is good to see continuing strong demand from first-time buyers but it is a concern that trends in affordability seem to be tightening. This is an especial challenge in London. As for the introduction of new FCA mortgage market rules, these do not appear to have hindered the market, although the full effects of the new rules may take some time to emerge.”
The Council of Mortgage Lenders’ members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.2 trillion.