Greater London sees 27% growth in loans to first-time buyers

mortgage

First-time buyers in Greater London borrowed GBP3bn in the second quarter 2014, an increase of 27% on the same period a year ago and up 10% on the first quarter of this year, according to new Council of Mortgage Lenders (CML) figures released on Wednesday.

The trade association for the mortgage lending industry reported that its data on the characteristics of lending in Greater London reveals that there were a total of 12,300 loans made to first-time buyers in the second quarter of this year, a rise of 4% on the previous quarter and 17% up on the second quarter of 2013.

CML’s Regulated Mortgage Survey found that loans for first-time buyers averaged GBP212,000 in the second quarter, compared to GBP200,000 in the previous quarter. First-time buyers typically borrowed 3.90 times gross income in the second quarter, in comparison to 3.83 in the first quarter. The UK average borrowing for first-time buyers is 3.46 times gross income. The average gross income of a first-time buyer household was GBP55,000, up on the average of GBP52,500 in the first quarter of 2014.

Higher house prices within London, compared to the rest of the UK, resulted in a continued shift towards more expensive properties bought by first-time buyers in the capital. Properties priced at more than GBP250,000 were purchased by 63% of first-time buyers during the second quarter, a rise from 57% in the first quarter 2014 and up from 51% in the second quarter of 2013, significantly higher than the UK overall level of 17%. Also, the typical loan-to-value in London is 75%, with first-time buyers in the city tending to put down larger deposits, compared to the rest of the UK.

First-time buyers also paid 21.1% of gross monthly income towards capital and interest payments in the second quarter, a higher proportion of income than 20.7% in the first quarter.

Lending to home movers in the Greater London area also grew in the second quarter of this year. Home-mover loans totalled 9,000 in the second quarter, an increase of 1% on the previous quarter and 7% compared to the same period last year. These loans were valued at GBP3bn, a rise of 9% on the first quarter 2014 and 26% on the second quarter last year. Home movers typically borrowed 3.66 times their gross income compared to 3.60 in the first quarter and the 3.09 in the UK overall. Typical loan sizes for home movers amounted to GBP151,000 in second quarter, increased from GBP147,000 in the previous quarter. The gross household income of a home mover averaged GBP51,300 in second quarter, compared to GBP50,200 in first quarter 2014. Greater London home movers spent 17.2% of their gross income to cover monthly capital and interest payments, slightly down from 17.3% in the previous quarter and less than the 18.7% UK average.

The survey also revealed that home owner remortgage lending in Greater London increased both quarter-on-quarter and year-on-year. There were a total of 10,800 loans advanced for home-owner remortgages in the second quarter, an increase of 3% on the first quarter of this year and 5% on the second quarter a year ago. The value of these loans totalled GBP2.8bn, up by 7% quarter-on-quarter and 22% in comparison to the second quarter last year. Home-owner house purchase lending also increased 3% quarter-on-quarter in London, with a total of 21,300 loans. The value of these loans totalled GBP6bn, an increase of 9% on the first quarter. When compared to the second quarter of 2013, the number of loans rose by 13% and value of these loans increased by 27%.

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