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UK mortgage market shows strong regional differences


Published: 26 September 2016 | Author: Gareth Hill

It is sometimes said that, instead of looking at the UK as one big national housing market, we would understand more by considering it as a series of smaller, regional markets. That view is reinforced when we reflect on CML data for Wales, Northern Ireland, Scotland and London. The numbers suggest that each of these markets has its own unique characteristics, distinguishing it from the rest of the UK.  

Looking at the UK overall, last year saw the highest volume of loans for house purchase by owner-occupiers since 2007. This was also reflected in Northern Ireland, Scotland and Wales. In London, however, lending to owner-occupiers was lower than in the previous two years, although this is perhaps not surprising given affordability challenges in the capital. But when we look at affordability and historical lending trends in each region, we see that Wales, Northern Ireland and Scotland differ in other ways.

Chart 1: Quarterly number of loans advanced for house purchase by region

20160915 News & Views Chart 1 image - Regional comparison

Source: CML

Download the data

Finding one: There are significant differences between regional markets

A simple comparison of activity in the second quarter of this year with the first quarter shows substantial difference in regional trends.

The number of first-time buyer loans increased in Wales by 31%, in Scotland by 39%, in Northern Ireland by 18%, but in London by only 3%. Over the same period, lending to movers in Scotland increased by 11%, but it fell by 6% in Wales, by 7% in Northern Ireland, and by 37% in London. 

Remortgaging also varies by region. In Northern Ireland, it has been relatively static since the recession, but grew by 25% in the second quarter of this year. In Wales, it increased by 8%, in Scotland by 11%, and in London by 5%.

Finding two: First-time buyers have helped drive recovery in different markets

First-time buyers have been a key driver of recovery in Scotland, Wales, Northern Ireland and London since the recession, but this has become more pronounced in the most recent figures, for the second quarter of 2016.

In that period, first-time buyers borrowed more than movers in all four regions for the first time since the recession. It was the first time since the second quarter of 1999 that first-time buyers had borrowed more than movers in Wales, while in Scotland, it was the first time this had occurred since the first quarter of 2001. But in Northern Ireland and London first-time buyers have more consistently borrowed more than movers since 2010 and 2012 respectively.

Finding three: Trends in borrowing by movers have been distorted by stamp duty reforms

Home mover activity was skewed this year by borrowers anticipating changes in stamp duty, which help boost activity in the first quarter.  This meant a reduction in activity in the second quarter as a consequence. Despite this, however, borrowing for house purchase in the second quarter was at its highest in Wales and Northern Ireland than in any year since 2007 – boosted by high levels of borrowing by first-time buyers.

Table 1: First-time buyer affordability measures


  Average loan size Average household income Income multiple loan-to-value % of gross monthly household
income to service capital and interest repayments
Greater London £258,400 £64,500 3.98 75.2% 18.9%
Scotland £99,800 £33,600 3.03 85.0% 16.6%
Wales £108,000 £33,800 3.31 86.1% 17.2%
Northern Ireland £91,400 £31,500 2.90 85.9% 16.2%
UK £132,800 £40,000 3.51 84.3% 18.0%


Source: CML 

Affordability for first-time buyers continues to vary across regions, with those in Northern Ireland and Scotland borrowing smaller amounts. In London, however, first-time buyers borrow almost twice the UK average, reflecting higher house prices there. 

First-time buyers in Wales and Scotland have near identical average household incomes of around £33,000 a year. Loan Registry data also shows that average house prices are also almost identical in the two countries. However, first-time buyers in Wales took out larger loans – averaging £108,000, compared to £100,000 in Scotland.

In Northern Ireland, first-time buyers are borrowing an average of just over £91,000, the lowest amount in any region – and significantly lower than their average advance of £122,000 in the second quarter of 2007. By contrast, first-time buyers in Scotland, Wales and London are all borrowing amounts that are close to or higher than their peak historically.

But while the size of loans has increased across most regions, the proportion of income borrowers are paying each month to cover capital and interest repayments has dropped to an historic low point. This reflects a combination of rising incomes, historically low interest rates and a growing desire by borrowers to take out longer-term mortgages.

Table 2: Home mover affordability measures

  Average loan size Average household income Income multiple Loan-to-value % of gross monthly household
income to service capital and interest payments
Greater London £324,000 £84,700 3.98 65.0% 19.2%
Scotland £139,500 £33,600 2.84 77.6% 16.7%
Wales £130,800 £46,000 2.96 75.0% 17.1%
Northern Ireland £110,000 £31,500 2.49 75.3% 15.3%
UK £167,400 £53,600 3.26 72.4% 18.0%


Source: CML

Table Two illustrates the different characteristics of movers in different parts of the UK, and shows clearly that the idea of a uniform UK housing market with a ‘one size fits all’ approach for borrowers is illusory.

Government initiatives, whether introduced across the whole of the UK or by devolved administrations, also affect markets differently in different locations. There are some significant differences between Help to Buy equity loan schemes in different parts of the UK.  And while the Help to Buy mortgage guarantee is available across the UK, take-up has been mainly by first-time buyers outside of the London and the south east.


The past three to four years has seen growth in all regions, despite varying levels of recovery from the recession. Northern Ireland saw a far bigger drop in activity and house prices than London. But despite their contrasting fortunes, first-time buyers in both Northern Ireland and London have been important drivers of the housing market.