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First-time buyer lending up 32% year-on-year in London in third quarter of 2013

26 Nov 13

First-time buyer lending up 32% year-on-year in London in third quarter of 2013

Mortgage lending in London in the third quarter of 2013 followed a similar upward trend to the rest of the UK, new data from CML shows. Strong owner occupied house purchase activity was seen in London in all sectors – first-time buyers, home movers and remortgagors.

First time buyers

In the third quarter of 2013, the 13,100 loans advanced to first-time buyers in London marked an increase of 24% on the previous quarter and a rise of 32% compared to the third quarter of 2012.

Strong house price growth in London, and the knock on effect on the typical loan amount has resulted in stronger growth in the value of lending to first-time buyers.  In total, £2,960 million was advanced in the third quarter of 2013, a 25% increase compared to quarter two and up 42% compared to the same period last year.

In the third quarter, first-time buyers typically borrowed £198,000, an increase from £192,700 in the second quarter this year. While first-time buyers took out larger loans, the initial affordability of these loans was almost unchanged as a result of higher incomes and falling interest rates. On average first-time buyers who bought in this period spent 20.8% of their income on mortgage payments, unchanged from quarter two and less than the 21.3% in the same period in 2012.   

First-time buyer affordability in London remains tighter than in the UK overall. First-time buyers in London borrowed an average of 3.74 times their income in the third quarter compared to 3.67 in the second quarter and 3.59 times their income in the third quarter of 2012. 

There was a shift in the mix of properties bought by first-time buyers in London towards in this period. In quarter three, 53% of first-time buyers bought properties priced at more than £250k, up from 47% in the same period last year. In London only 3% of first-time buyers bought a property for less than £125k and therefore did not have to pay any stamp duty. At the other end of the scale 11% in London bought properties valued at more than £500k.

First-time buyers make up a larger proportion of house purchase loans in London – 55% of house purchase loans advanced in London in quarter three were to first-time buyers compared to 44% in the UK overall – a trend that has consistently been observed historically and is likely to be a function of demographics in London, with proportionately more younger people.

Chart 1: Lending to FTBs in London, number of loans advanced, and lending to FTBs in London as a proportion of the UK total (1 year moving average)

26.11.2013 London FTBs v2 

Source: CML regulated mortgage survey

Home movers

Home mover lending in London has shown growth in the third quarter of 2013. In total, 10,900 loans worth £3.4bn were advanced to home movers in London which was an increase of 28% compared to quarter two and a 38% increase in value of the loans. This however is a smaller growth on the third quarter of 2012 representing a 6% increase in the number of loans compared to a year ago but a 16% increase in value.

Lending for house purchase

Total house purchase lending in London was boosted by the increase in lending to first-time buyers and home movers showing an increase of 26% compared to the second quarter and 19% compared to the third quarter of 2012.

There were 24,000 house purchase loans advanced in London worth £6.4bn in total, a 32% rise in value compared to the second quarter of 2013 and up by 27% compared to the third quarter last year.

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)

26.11.2013 London house purchase v2

Source: CML regulated mortgage survey

Home movers

Home mover lending in London has shown growth in the third quarter of 2013. In total, 10,500 loans worth £3.4bn were advanced to home movers in London which was an increase of 28% compared to quarter two and a 38% increase in value of the loans. This however is a smaller growth on the third quarter of 2012 representing a 6% increase in the number of loans compared to a year ago but a 16% increase in value.

Remortgages

Remortgage lending in London has started to continue growth following over a year of subdued activity. There was £2.9bn advanced to borrowers remortgaging their houses in the third quarter of 2013, which was up by 25% compared to the second quarter and an increase of 42% compared to the third quarter of 2012.

Chart 3: Remortgage lending in London: Year-on-year % change in London and the UK

26.11.2013 London remortgage v2

Source: CML regulated mortgage survey

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

"The increase in lending for house purchase in London seems broadly consistent with UK-wide upward trends. First-time buyers were the key driver in the first half of the year in London but remortgagors and home movers have shown greater signs of life this quarter. As the Mayor of London's housing strategy shows, the London housing market has especial challenges and we will work with the Mayor in tackling them."

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 fourth quarter of 2013 will be released on Wednesday 26 February 2014.

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