The figures show that first time buyers in London make up a larger proportion of house purchase loans compared to the UK overall. In the second quarter, 56% of house purchase loans were to first time buyers in London compared to 46% in the UK overall.
In the second quarter of 2013, the 11,200 loans advanced to first time buyers in London marked an increase of 19% on the previous quarter and a rise of 38% compared to the second quarter of 2012.
Typical loan amounts have also increased, a knock on effect of strong house price growth in the capital, up 6.9% in the second quarter compared to 2.9% for the UK overall. This results in a larger growth in the value of lending to first time buyers.
The figures also show that £2,490 million was advanced to these borrowers in the second quarter, a 33% increase on the first quarter of 2013 and up 47% compared to the second quarter last year.
Whilst first time buyers took out larger loans, on average £192,600 compared to £183,900 in the second quarter last year, the affordability was almost unchanged thanks to higher incomes and falling interest rates. This meant on average first time buyers spent 20.8% of their income on mortgage payments almost unchanged from 21% in the first quarter of 2013.
Affordability in London does however remain tighter than in the UK overall with first time buyers borrowing an average of 3.67 times their income compared to 3.3 for the UK overall in the second quarter. The CML said that this may be why first time buyers in London are generally putting down larger deposits than in the rest of the UK.
The average loan to value remains at 75% in London compared to 80% for the rest of the UK. In addition, incomes of first time buyers in London are higher than in the rest of the UK, on average £52,100 per annum compared to £35,400 in the UK overall.
Total house purchase lending in London was boosted by the increase in lending to first time buyers and showed an increase of 16% compared to the first quarter and 18% compared to the second quarter of 2012.
There were 20,100 house purchase loans advanced in London worth £5.1 billion in total, a 23% rise in value compared to the first quarter of 2013 and up by 20% compared to the second quarter last year.
Home mover lending in London has been less strong compared to first time buyers in the second quarter of 2013 but there has still been growth. In total, 8,900 loans worth £2.6 billion were advanced to home movers in London which was an increase of 11% compared to quarter one and a 14% increase in value of the loans. This however is a smaller growth on the second quarter of 2012 representing a 1% fall in the number of loans compared to a year ago but a 2% increase in value.
After a year of subdued activity, remortgage lending in London has started to show some growth as seen in the UK overall. There was £2.4 billion advanced to borrowers remortgaging their houses in the second quarter of 2013, which was up by 31% compared to the first quarter and an increase of 14% compared to the second quarter of 2012.
‘Mortgage lending in London has followed a similar pattern to the rest of the UK with strong house purchase activity this quarter, strengthened particularly by first time buyer activity,’ said CML director general Paul Smee.
‘Total lending for house purchase has also increased this quarter upon last and from a year ago which suggests increasing confidence that economic conditions are becoming more favourable,’ he added.
According to David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, the catalyst behind all this has been a swift upturn in the availability of mortgages. ‘Government schemes have emboldened lenders, and given their balance sheets plenty of extra muscle,’ he said.
‘They are much more willing to extend an olive branch to high LTV buyers, which has opened the door to scores of first time buyers who previously had it slammed in their face by the force of weak wage growth, high inflation and high deposit requirements. It’s vital that lenders continue to ease lending criteria to encourage more first timers in the capital to buy as, ultimately, these are the people who make it possible for the property chain to stay fluid,’ he pointed out.
‘The improvement must be sustainable, though. Supply and demand should be in equilibrium to keep the housing market sustainable for the future, but at the moment the balance is skewed. There is a huge amount of demand, but not enough supply, and this rising tide of demand is lifting up house prices along with it,’ he added.
The figures are positive news for buyers in London as access to the property market improves despite some warning about a bubble in the capital city, according to Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB).
‘Although property prices are on the rise, competition between lenders has opened up the market for first time buyers, with growing product choice and competitive rates. The early success of the government’s Help to Buy scheme, and buyer participation in the initiative, also indicate consumer opinion of the market is favourable,’ he explained.
‘However, to maintain this optimistic outlook it’s important all players in the market continue to act responsibly, ensuring house price rises don’t undermine the support on offer,’ he added.
