First-time buyer loans totalled 13,300 in the third quarter in London - 8% up on the previous quarter, and 6% up on Q3 2013. First-time buyers in the period borrowed £3.3 billion - up 11% on the previous quarter and 16% on Q3 2013.
There were 10,600 home-mover loans in the third quarter, up 16% on the previous quarter but 1% down on Q3 2013. Total value of these loans was £3.7 billion, up 18% on the second quarter and 10% on the third quarter 2013.
Remortgage lending in the quarter showed growth in London compared to the previous quarter but down in volume slightly compared to the third quarter last year.
Lending for home-owner house purchase
There were more loans and a higher amount borrowed in Greater London in this quarter than in any quarter since 2007. House purchase lending to home-buyers increased quarter-on-quarter in London totalling 23,900 loans, up 12% compared to the second quarter and the value of these loans totalled £7.1 billion, a rise of 15% on the second quarter. Compared to the third quarter of 2013, the number of loans increased 3% and value of these loans increased by 13%. This is the highest quarterly volume in London since the fourth quarter 2007, and the highest amount borrowed since the third quarter of 2007.
Lending to first-time buyers
First-time buyers took out more loans and borrowed more in total than in any quarter since 2007 totalling 13,300 loans and £3.3bn. The affordability levels slightly improved with first-time buyers typically borrowed 3.86 times their gross income, less than the 3.90 in the previous quarter but above the UK average of 3.41.
The typical loan size for first-time buyers was £221,997 in the third quarter, up from £212,500 in the previous quarter. The typical gross income of a first-time buyer household was £58,000 compared to £55,255 in the second quarter.
First-time buyers in London have tended to put down larger deposits than in the UK – typically putting down a deposit worth 24% of the property value compared to the UK average of 17%. In the third quarter, first-time buyers paid 21% of gross monthly income towards capital and interest payments, a minor change from the second quarter when it was 21.1%.
Lending to home movers
In the third quarter of 2014, lending to home movers saw larger growth quarter-on-quarter compared to first-time buyer lending, but a slight decline in lending volumes when looking at year-on-year comparisons. Home movers did however borrow more this quarter than any other quarter since 2007 totalling £3.7bn.
Home mover affordability changed fractionally, with home movers typically borrowing 3.69 times their gross income compared to 3.66 in the second quarter and the 3.05 in the UK overall. The typical loan size for home movers was £290,000 in third quarter, up from £281,000 in the previous quarter. The typical gross household income of a home mover was £83,596 in third quarter compared to £82,614 in second quarter.
Home movers in Greater London spent 20.8% of their gross income to cover monthly capital and interest payments, slightly changed from 20.6% in Q2 and less than the 18.8% UK average.
Lending to home owners for remortgage
The number of loans advanced for remortgage in Greater London increased quarter-on-quarter but declined slightly year-on-year. Home-owner remortgage lending in the third quarter totalled 11,400 loans advanced in the period, which was an increase of 4% on the second quarter, but down 3% on the third quarter 2013. These loans totalled £3bn in value, an increase of 3% quarter-on-quarter and 4% compared to Q3 2013.
Paul Smee, CML director general, commented:
“London lending is currently driven by both home-mover and first-time buyer growth so borrowers can still find homes in London at their affordability level. Despite the growth of lending to its highest level for seven years, these figures have remained pretty consistent for the past twelve months which suggests a steady market."
Richard Sexton, director of e.surv chartered surveyors, commented:
“A first-home in London comes with a hefty price tag, but that doesn’t seem to be putting off buyers in the capital – the number of first-time buyers increased steadily between the second and third quarters of this year. Global economic uncertainty may be sapping energy from the top of the market, but first-time buyer properties are still in high demand and short supply. Two-thirds of buyers spent more than a quarter of a million pounds on their first home in London.
The UK mortgage market has been fine-tuned over the last year – with the new regulation arguably unsettling demand and some first-time buyers may have been put off as a result
To carry the existing momentum forward, we need much more new housing, and quickly, or we may face creating a capital where only cash-rich buyers can get onto the housing ladder. While wages remain sluggish and interest rates low, saving for a deposit will remain the biggest obstacle blocking the path to homeownership.”
David Newnes, director of Reeds Rains and Your Move estate agents, comments: “The UK housing market has been thoroughly rejuvenated in the seven years since the crisis, and while conditions may have cooled in recent months, we’re still seeing a spirited flow of mortgage lending. And this energy looks set to continue making progress into 2015.
In terms of house price growth, London and the South East have been at the forefront of the pack – but schemes like Help to Buy have provided some extra backing to other regions where property values are stalled, by championing first-time buyers. A new score of higher LTV lending has revived confidence among aspiring homeowners, and helped to overcome the wariness that set in after the recession.
Northern Ireland, Scotland and Wales have all outpaced the capital in terms of annual growth in first-time buyer borrowing during Q3. It’s encouraging to see these activity levels being reinforced, but this support needs to be sustained and widespread across the country to put the memory of the recession to bed.”
