There was an increase in the number of first-time buyers in London who took out mortgages in London in the last quarter, despite the affordability issues faced by many in the city. This was the highest number in the capital in a single quarter for almost three years, according to the Council of Mortgage Lenders (CML).
In its first London lending report, the CML said that despite the lowest level of homeownership in the UK, London still accounts for 28% of the value of all first-time buyer lending in the UK over the last year.
Unsurprisingly, first-time buyers in London put down larger deposits than in other parts of the UK due to higher property prices in the Capital and tougher affordability criteria. First-time buyers in London purchased properties with an average loan-to-value (LTV) ratio of 75%, a figure unchanged since the third quarter of 2008, and less than in the rest of the UK at 80%.
Property buyers in London generally have larger deposits supported by an average salary of £50,000 against £34,000 in the rest of the country. Furthermore, just 28% of first time buyers buy unaided in London, in comparison with 34% in the rest of the country.
First-time buyers in London make up a larger proportion of the total mortgage market - around 50% compared to around 40% in the UK overall, reflecting demographics in London with more young people of a typical first-time buyer age.
A total of 20,600 house purchase loans worth £5,070m were advanced in London, up by 22% compared to the second quarter and a 4% increase compared to the same period last year. This rate of growth compared favourably to the UK overall, where house purchase lending increased by 13% on the second quarter. The total value of loans for house purchase (5,050m) marked the highest figure since the last quarter of 2007.
Lending to home movers overall in London also rose, this time by 18% against Q2 with the average home mover LTV of 66%. Remortgaging also followed the overall UK trend, falling in Q3, to a total of £2,050m, a 16% fall year-on-year.
Paul Smeee, firector general at the CML, said: "The London housing market faces similar issues to the rest of the UK in terms of a lack of supply and affordability, yet different demographics, population flows and tenure patterns mean that it is also unique.
"With the Mayor now directly responsible for housing strategy and investment in London, we look forward to seeing his finalised London Housing Strategy. Lenders want to be recognised as part of the solution and we will work constructively with the government and the GLA on deliverable solutions to London’s housing challenges."
Article courtesy of Property Investor Today