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Increased loan availability aids first-time buyers

News

Published: 6 March 2013 | Author: Bernard Clarke

Newly-published regional data from the CML has confirmed increased activity by first-time buyers in Scotland, Wales and Northern Ireland – and even in London, where affordability is most challenging.

The data showed that, despite divergent trends in housing markets in different parts of the UK, first-time buyers across the country are regaining their confidence and returning to the market.

In London, the number of first-time buyers rose by 15% in 2012. A total of 37,300 buying their first home in London last year was the highest since 2007, and up from 32,400 in 2011. The increase in activity came despite the fact that buyers in the capital face more challenging conditions than elsewhere in the UK. 

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 (the averages for the UK as a whole were 3.26 times income and 20% of income). They also put down larger deposits – 25% in London in the fourth quarter, compared to a UK average of 20%.

Only 4% of first-time buyers bought properties for less than £125,000 in London, compared to 40% in the UK as a whole. Another reflection of higher prices in the capital was that 8% of first-time buyers paid more than £500,000 for their home, while only 2% did so across the country.

Lending to movers in London increased by 4% in 2012, but remortgaging was down 3% –  although the fall was smaller than in the rest of 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

In Scotland, the number of first-time buyers also increased – up 13% compared to 2011. A total of 19,000 bought their first home in 2012, the highest number for four years.

Affordability for first-time buyers in Scotland was less challenging than for the UK as a whole, with 62% buying a property for less than £125,000. On average, they borrowed 2.88 times their income and spent 18% of their income on mortgage repayments.  Lending to movers in Scotland edged up, but by less than 1%, while remortgaging was down 19% year-on-year.

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

 

 House Purchase lending in Scotland, number of loans advances

Source: CML regulated mortgage survey

In Wales, the number of first-time buyers increased by 5%. First-time borrowers paid smaller deposits than the UK average, taking out mortgages at an average 85% loan-to-value ratio. House prices fell marginally in 2012, and almost two-thirds (64%) bought a property for less than £125,000.

Lending to movers nudged down, but by less than 1%, while remortgaging in Wales was 19% lower.

The number of first-time buyers in Northern Ireland was at its highest since 2007. At 5,100, the total was 9% higher than in 2011. The vast majority (79%) bought properties for less than £125,000, borrowing an average of 2.89 times their income and committing 19.1% of income to mortgage repayments. Lending to movers was down 10% year-on-year, while remortgaging was 29% lower.

More widespread availability of 90% mortgages in 2012 was a major factor in increased activity by first-time buyers across the UK.