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Number of first-time buyers rise by 15% in London in 2012; largest annual total since 2007

26 Feb 13

Number of first-time buyers rise by 15% in London in 2012; largest annual total since 2007

The number of first-time buyers in London rose by 15% in 2012, marking the largest annual total since 2007, according to new data released today by the Council of Mortgage Lenders.

A total of 37,300 first-time buyers bought a home in London in 2012, up from 32,400 in 2011.

On a quarterly basis, first-time buyer activity increased, while home mover lending fell and remortgage lending remained stable.

First-time buyers

In the fourth quarter, a total of 10,200 first-time buyers bought their first home in London, a 4% increase compared to the previous quarter, and up by 17% on the fourth quarter of 2011. This represented a larger boost compared to the UK overall where lending to first-time buyers increased by 14% compared to the fourth quarter of 2011.

It was also the largest single quarter for first-time buyer activity since the last quarter of 2009 - when activity was boosted prior to the end of the previous stamp duty holiday.

First-time buyer affordability in London remained tighter than in the UK overall. First-time buyers in London borrowed an average of 3.59 times their income in the fourth quarter and their mortgage payments typically consumed 21.2% of their income. This compares to an average income multiple of 3.26 and 20% of income taken by mortgage payments for all first-time buyers in the UK.

First-time buyers in London also put down larger deposits than in the UK overall. The average loan to value ratio remained at 75% in the fourth quarter and 2012 overall, compared to 80% in the UK.

Half of all first-time buyers in London bought properties priced between £125,000 and £250,000. This was a similar proportion to the UK at 47%, but first-time buyer activity was significantly different for properties priced below £125,000 and above £250,000.

While in the UK around 40% of first-time buyers typically bought properties for less than £125,000, in London almost no (4%) first-time buyer purchases were in this band, with the remainder at above £250,000. At the other end of the scale, 8% of first-time buyers in London bought properties valued at more than £500,000, compared to just 2% of these borrowers in the UK.

Chart 1: Number of loans advanced to first-time buyers in London

Number of loans advanced to first-time buyers in London

Source: CML regulated mortgage survey

Home movers

As in the rest of the UK, lending to home movers in London fell in the fourth quarter. A total of 9,600 loans (worth £2.6 billion) were advanced to home movers in London, a 7% fall compared to the third quarter, but up by 4% compared to the fourth quarter last year.

The dip in the last quarter of the year did not counter the improvement seen earlier in the year. Overall, lending to home movers increased by 4% in 2012 with 37,200 loans advanced compared to 35,600 loans in 2011.

House purchase lending

Total house purchase lending fell in the fourth quarter compared to the previous quarter but stronger compared to the same period in 2011. 19,800 loans were advanced in the last quarter of 2012, down from 20,100 in the third quarter, but up by 11% compared to the fourth quarter in 2011 (17,900 loans).

The increase in lending to both first-time buyers and home movers in 2012 overall, resulted in a 10% increase in house purchase lending in 2012. A total of 74,600 loans were advanced (worth £17.8 billion), up from 67,900 loans (worth £16.3 billion) in 2011 - the largest annual total since 2007.

Chart 2: House purchase lending in London, number of loans advanced, and house purchase lending in London as a proportion of the UK total (1 year moving average)

House purchases London

Source: CML regulated mortgage survey

Remortgage lending

In the fourth quarter, £2.02 billion was advanced for remortgaging, unchanged from the third quarter but still 10% lower than in the same quarter of 2011.

As in the UK overall, remortgage lending in London was subdued in 2012. A total of £8.4 billion was advanced to borrowers remortgaging, a 3% fall compared to 2011, a smaller fall than was seen in the UK as a whole.

Commenting on the data, CML director general Paul Smee said:

"These figures show that first-time buyers in London are regaining their confidence and returning to the market. Even though property in London remains more expensive than in the rest of the UK, low interest rates and the increased availability of high loan-to-value mortgages for borrowers with smaller deposits has enabled more aspirational homeowners to enter the market than any time in the last five years."

Notes to editors

1. 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 11.3 million mortgages in the UK, with loans worth over £1.2 trillion.

2. Source: CML Regulated Mortgage Survey.

3. The Council of Mortgage Lenders does not publish statistics for mortgage approvals. The data in our monthly Regulated Mortgage Survey and gross lending press releases relate to mortgage advances only. A mortgage approval is the firm offer to a customer of a specific amount of credit secured against a particular property. A mortgage advance is the total amount of loan actually provided to the buyer, by the lender. Please see the mortgage statistics timeline on our website for further information.

4. Data for the first quarter of 2013 will be released on Tuesday 28 May 2013.

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