From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to for wider content and updates from UK Finance.

  1. Home
  2. News
  3. News & Views
  4. A booming housing market - or a fragmented one?

A booming housing market - or a fragmented one?


Published: 4 June 2014 | Author: Bernard Clarke

The notion of a national housing market – in which conditions are broadly similar in different parts of the UK – has become less relevant in recent times. Increasingly, it has fragmented into a series of disparate, regional markets in which there are different conditions and challenges for lenders and borrowers. This article looks at some of the current issues and defining characteristics in different regional markets in the UK.


Developments in London have recently tended to dominate media coverage of the buoyant housing market. Recent coverage of a "housing boom" may reflect conditions in London, but not the experience of large parts of the rest of the UK.

Lending for house purchase in the capital totalled £5.6 billion in the first three months of this year, up 37% on the same period in 2013. Growth in borrowing by first-time buyers has been particularly strong, with advances to this group totalling £2.7 billion in the first quarter – up 49% year-on-year.

But the average first-time buyer in London has a significantly different profile to the rest of the UK. The typical first-time buyer advance in the capital is now £200,000, compared to a UK average on £119,000. And a first-time buyer loan in London is supported by an average income of more than £52,000, compared to £36,000 across the UK as a whole. 

Even so, affordability for first-time buyers in London is more challenging, with the typical customer borrowing 3.83 times income, compared to a UK average of 3.42 times income. And rising property prices in the capital have contributed to a rise in this multiple compared to a year ago, when the average first-time buyer in London borrowed 3.6 times income. That reinforces our view that the current period of buoyancy in London and other market “hot spots” may begin to slow in the coming months as a result of affordability constraints.

To help bridge the affordability problems caused by high property prices in London, we are keen to work with the Mayor’s office to encourage its desired expansion of shared ownership as a tenure of choice in its own right. Ultimately, it is for individual firms to determine their lending policies, but shared ownership clearly has potential as one of the means of addressing London’s acute affordability challenges, as long as schemes are developed in ways that encourage lenders to support them.

Private renting is more prevalent in London than elsewhere in the UK, and the Mayor is seeking to raise standards in the sector through the introduction last month of the London Rental Standard. This seeks to improve the experience of tenants, and has a target to accredit 100,000 landlords and agents by 2016.


The mortgage market in Scotland has seen a resurgence, with strong growth helping to ensure that lending for house purchase last year was at its highest level since it peaked in 2008. First-time buyers were a key driver of this growth, with the amount borrowed in the first quarter of this year 45% higher than a year earlier.

While some of the trends in lending in Scotland are broadly in line with developments in the UK overall, affordability is significantly different. First-time buyers in Scotland borrow an average of 2.98 times their income, lower than the average multiple for the UK as a whole, and significantly lower than in London. As a result, monthly mortgage repayments for first-time buyers in Scotland account on average for 16.9% of income, lower than the average of 19.3% for the UK as a whole.

House prices in Scotland mean that the average advance to a first-time buyer is £90,000, less than half the figure for London and nearly £30,000 lower than the UK average.

The Help to Buy mortgage guarantee scheme has so far been used to purchase nearly 1,000 homes in Scotland, with 80% of these going to first-time buyers. The Scottish government announced a further £40 million investment into the shared equity part of Help to Buy, bringing the total overall to £275 million.

The Housing Bill, currently before the Scottish government, has implications for the social housing sector, with provisions to end Right to Buy in the country. The amended bill would also see the three-year notice period for tenants reduced to two years.

The private rented sector could also be affected by a change in the tenancy regime. We have been contributing to a review group, which has recommended to the the Scottish government that the existing short assured and the assured tenancy regime should be replaced by a new statutory tenancy regime. The aim is to make procedures easier to understand and attractive to lenders, tenants and landlords.

Northern Ireland

In recent years, Northern Ireland has experienced a sharp reversal of its booming housing market. The recession coincided with a sharp reduction in mortgage lending, and the rate at which house prices declined led to negative equity becoming more common than elsewhere in the UK.

Over the past year, however, the seeds of a market recovery have begun to sprout as lending for house purchase has begun to increase again. In 2013, it reached its highest level since 2007, and borrowing by first-time buyers has been particularly strong. During the former boom period, borrowing by home movers and for remortgaging was often three or four times the level of activity by first-time buyers. But in every quarter since the beginning of 2013, first-time buyers in Northern Ireland have taken out more loans than any other type of borrower.

The Northern Irish market has further challenges to overcome before recovery is firmly established. The Department for Social Development is focusing on measures to reduce negative equity and the number of cases of possession, and we are working with the Northern Ireland housing repossessions task force on this initiative.


The housing market in Wales has shown signs of recovery in the last year, with lending for house purchase up 31% by value year-on-year in the first quarter of 2014.

First-time buyers have played a significant part in this growth, with their borrowing up 37% year-on-year in the first quarter. Levels of mortgage debt are more affordable in Wales than in the UK as a whole with the typical borrower taking out a mortgage equivalent to 3.22 times their income. People in Wales are also borrowing on average £20,000 less for each house purchase. Mortgage payments account for 18.3% of household income, lower than the UK average.

Purchases in Wales under the Help to Buy mortgage guarantee scheme account for 1.2% of its usage in the UK, or around twice the rate at which the scheme is being used in London. The Welsh government also launched its Help to Buy equity loan scheme in January, with the aim of injecting demand into the market, but it is still early to judge its effect.

The Welsh government is also pursuing a number of other initiatives to increase housing supply, although this may be affected by proposals for increased devolution and reforms seeking to reduce the number of councils from 22 to 10 or 11. This could disrupt the planning process if the transfer of powers does not proceed smoothly.