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First-time buyer numbers in London and Scotland at 3-year high

CML

The number of first-time buyers in London and Scotland have risen to their highest levels in nearly three years, according to the Council of Mortgage Lenders.

In its first quarterly report on lending in London, the CML said that around 10,000 first-time buyers took out a mortgage in London in the third quarter, the highest level since the fourth quarter of 2009 when 10,600 FTBs secured a mortgage.

The number of FTBs taking out mortgages increased 25 per cent from 8,000 between the second and third quarters.

According to the trade body, the level of home-ownership is around 50 per cent, the lowest in the UK, yet it accounted for 28 per cent of the value of all first-time buyer lending over the past year, due to the size of the city.

The average first-time buyer household in London had an income of £50,000 compared to £34,000 in the UK overall. They borrowed an average of 3.5 times their income with mortgage payments typically consuming 21.3 per cent, compared to figures in the rest of the UK where the average income multiple amounted to 3.25 and 20.1 per cent of income was taken by mortgage payments.

FTBs in London put down a larger deposit than in other parts of the UK, purchasing properties with an average 75 per cent loan-to-value, which is unchanged since the third quarter of 2008. The average for the rest of the UK is 80 per cent LTV.

FTBs are, on average, 31 when purchasing in London, compared to 29 in the rest of the UK. FTBs make up a larger proportion of the total mortgage market in London – 50 per cent – compared to around 40 per cent in the UK overall.

In the third quarter, a total of 20,600 house purchase loans, worth £5.7bn, were advanced in London, up 22 per cent compared to the second quarter. A total of 10,500 loans, worth £2.9bn, was advanced to borrowers remortgaging in the third quarter, down from £2.1bn in the second quarter.

In Scotland there were 5,100 loans advanced to FTBs in the third quarter, a 6 per cent increase on the 4,800 loans advanced in the second quarter, and the largest number since the fourth quarter of 2009, when there were 5,500 loans advanced.

By value, FTBs in Scotland borrowed £460m, up from £450m in the previous quarter and £440m in the third quarter of last year.

There were 7,400 loans advanced to home movers, a 3 per cent fall compared to the third quarter – 7,600 loans – and down by 6 per cent on the same period last year – 7,900 loans. By value, home movers borrowed £1bn in the third quarter of 2012, down from £1.01bn in the previous quarter and £1.05bn in the same quarter of 2011.

As in the UK overall, there was a fall in remortgage lending in Scotland compared to both the previous quarter and the third quarter of 2011. A total of £670m was advanced to borrowers remortgaging, down from £740m in the last quarter and a 28 per cent fall compared to the £930m advanced this time last year.

The percentage of income spent on mortgage payments by FTBs in Scotland remained stable at 17.8 per cent, spending less of their income than in the UK overall, at 20.1 per cent.

In Scotland, FTBs typically borrowed 2.83 times their income, lower than the 3.25 in the UK, and reflecting the lower house prices in Scotland.

CML director general Paul Smee says: “The London housing market faces similar issues to the rest of the UK in terms of a lack of supply and affordability, yet different demographics, population flows and tenure patterns mean that it is also unique.

“With the Mayor now directly responsible for housing strategy and investment in London, we look forward to seeing his finalised London Housing Strategy. Lenders want to be recognised as part of the solution and we will work constructively with the government and the GLA on deliverable solutions to London’s housing challenges.”

CML Scotland chairman Iain Malloch says: “The boost in first-time buyers is encouraging but the rest of the market still remains broadly flat. The Funding for Lending scheme is likely to assist with growth going forward and we welcome the MI New Home scheme – enabling people to access higher loan-to-value mortgages on new build properties – but it is still too early to see any meaningful effects flowing into the market as yet.”

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