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Consumer appetite strong in London as first-time buyer activity remains stable

28 May 13

Consumer appetite strong in London as first-time buyer activity remains stable

Half of all adults surveyed in London would like to buy a new home to live in (be that a first or subsequent home) in the next 2-3 years, according to findings released today by the Council of Mortgage Lenders based on a survey undertaken by YouGov1.

In the longer term, 75% of adults currently living in London would like to own their own home in 10 years time, a slightly lower proportion than in Great Britain overall where 79% of individuals indicated a longer term preference for home ownership.

Chart 1: Home-ownership preferences in 10 years’ time in London and in GB, by age group, %

Yougov London

Source: CML calculations based on YouGov survey

In line with these consumer trends, first-time buyer activity was similar to the first quarter of 2012, while home mover lending and remortgaging was down, according to separate data released today by the CML.

First-time buyers

A total of 9,400 loans were advanced to first-time buyers in the first quarter in London, unchanged from the same quarter last year. This was a more positive result than the figures suggest due to the boost in first-time buyer activity in the first quarter last year as a result of the end of the stamp duty holiday in March.

First-time buyer affordability in London remained tighter than in the UK overall. First-time buyers borrowed an average of 3.58 times their income in the first quarter and their mortgage payments, on average, consumed 21% of their income. This was a marginal improvement compared to the fourth quarter of 2012 and is likely to due to the continuing downward trend in mortgage interest rates, however affordability remained less favourable than in the UK overall where the average income multiple was 3.23 in the first quarter and on average 19.5% of first-time buyer income was taken by mortgage payments.

The average loan-to-value ratio for first-time buyers remained at 75% in London in the first quarter, below the 80% seen in the UK overall.

First-time buyers in London continued to make up a larger proportion of house purchase loans in the first quarter than in the UK overall. 54% of house purchase loans advanced in the first quarter in London were to first-time buyers compared to 44% in the UK overall.

Chart 2: Lending to FTBs in London, number of loans advanced and average LTV ratio

28.05.13 London lending to FTBs in London 

Source: CML regulated mortgage survey

Home movers

As in the UK, lending to home movers in London dipped in the first quarter. A total of 8,000 loans (worth £2.3 billion) were advanced to home movers in London, an 18% fall compared to the fourth quarter of last year, and down by 5% compared to the first quarter of 2012.

While lending to home movers fell in London, the falls were not as large as in the UK overall, where lending fell by 9% compared to the first quarter of 2012 and by 24% compared to the previous quarter.

Loans for house purchase

Total house purchase lending fell in the first quarter in London compared to both the previous quarter and the first quarter last year. A total of 17,400 loans (worth £4.1 billion) were advanced for house purchase in the first quarter in London, a 12% fall compared to the previous quarter - reflecting the expected seasonal pattern with weaker activity in the first two months of the year.

This also represented a 2% fall compared to the first quarter of 2012 - however when the stamp duty effect is factored in (which boosted activity in the first quarter of last year) this suggests a more positive outcome.

Chart 3: House Purchase lending in London, number of loans advances, and house purchase lending in London as a proportion of the UK total

28.05.13 London house purchase lending in London

Source: CML regulated mortgage survey

Remortgage lending

As in the UK overall, remortgage lending in London remained subdued. A total of £1.8 billion was advanced to borrowers remortgaging in the first three months of 2013, an 18% drop compared to the first quarter of last year, similar to the fall seen in the UK as a whole, where remortgage lending dropped by 19% compared to the first quarter of last year.

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

"These figures show that higher house prices and tougher affordability constraints in London have not had a significant impact on consumer appetite to buy or move home in the capital. A similar percentage of those who live in London want to be home-owners despite differences in demographics and population flows.

"Lending activity in London was largely similar to the same period last year, a positive picture bearing in mind the significant boost to the market caused by the end of the stamp duty holiday in March last year."

Notes to editors

1. These findings are CML calculations based on a poll conducted by YouGov plc with a total sample size of 8183 GB adults, 1285 of who lived in London.  Fieldwork was undertaken between March 13 and 15 when 4,045 GB adults were surveyed, and March 25 to 27 when a further 4,138 were questioned.

2. 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.

3. Source: CML Regulated Mortgage Survey

4. 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.

5. Data for the second quarter of 2013 will now be released on the revised date - Wednesday 28 August 2013

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