London property market avoids usual seasonal lending dip

The usual seasonal dip in home lending in the first quarter of the year didn’t seem to happen in London as the latest data shows borrowing up quarter on quarter and year on year.

The data from the Council of Mortgage Lenders shows that home buyers in London borrowed £7.1 billion in the first three months of 2016, up 6% quarter on quarter and 41% on a year ago. They took out 21,400 loans, down 2% on the previous quarter but up 20% compared to the first quarter 2015.

First time buyers borrowed £2.9 billion, down 7% on the fourth quarter 2015 but up 19% on the first quarter last year. This equated 10,700 loans, down 10% quarter on quarter but up 3% year on year.

Home movers borrowed £4.2 billion, up 18% quarter on quarter and 63% compared to a year ago. This equated to 10,600 loans, up 8% quarter on quarter and 43% compared to the first quarter of 2015.

Remortgage activity totalled £4 billion, up 4% on the fourth quarter 2015 and 36% compared to a year ago. This came to 13,500 loans, up 2% quarter on quarter and 21% compared to a year ago.

‘The usual seasonal dip in lending in the first quarter of the year didn't seem to impact London as strongly as the UK overall, mainly due to a strong uptick in home mover activity. Remortgage lending also performed well resulting in the highest first quarter remortgage levels in the capital since 2009,’ said Paul Smee, director general of the CML.

‘The housing market in Greater London has some unique characteristics compared to the rest of the UK such as more first time buyers, but lower overall levels of home ownership,’ he pointed out.

‘Affordability and the supply of housing remain critical factors for the London market, and we will be pleased to work with the new mayor and his deputy on how to deliver appropriate strategy over his term of office,’ he added.
The data also shows that quarter on quarter affordability metrics for first time buyers show that the amount borrowed increased to £248,047 compared to the UK average of £130,500, from £243,746, but this was offset by a rise in the total household income of borrowers to £62,508 compared to the UK average of £40,000, from £61,155 meaning the median income multiple remained virtually unchanged from 3.94 to 3.93.

London home movers saw a similar trend to £338,500 to the UK average of £172,295, from £315,995 the previous quarter, and household income increased to £91,862 on average compared to £56,104 UK-wide, from £84,313 meaning the income multiple decreased slightly from 3.87 to 3.83.

The proportion of monthly gross income home buyers are spending on capital and interest repayments was 19.0%, which was the lowest level since the CML began tracking this metric in 2005.

The number of remortgage loans was the highest first quarter figure since 2009, and the highest value of remortgage lending in London in the first quarter since 2008.

David Brown, chief executive officer of Marsh & Parsons, believes that it is encouraging to see home movers at the forefront of borrowing at a time when the supply of new housing is low.

‘It is vital that existing home owners are taking opportunities to sell up and move up the property ladder, freeing up properties at the lower end of the market. It’s also a great vote of confidence in London,’ he explained.

‘People sell their homes when they recognise strong house price growth and the favourable returns to be made, plus the belief that they’ll be able to find a buyer easily. In London, all these elements are firmly in place,’ he pointed out.

He revealed that the firm saw buyer demand increase 9% year on year in the first three months of 2016 with an average of 14 buyers competing for every available property on the market.

‘It’s important in the long term that first time buyers in London remain similarly assured of the affordability and possibility of climbing onto the ladder,’ he added.