But the speed of the recovery differs from region to region. While the recovery in the capital is racing forward, many regions have a long way to go to catch up.
Macro recovery: Positive picture nationwide
In November there were 71,920 loans advanced to homebuyers, the highest number since January 2008, according to our latest e.surv Mortgage Monitor. It marked a 34% increase from November 2012 and a 6% month-on-month increase on October this year.
This increase has in part been driven forward by a rise in high LTV lending to borrowers with small deposits. There were 9,493 loans to high LTV borrowers in November, 3% more than in October and the highest number in a single month since April 2008.
The catalyst for this has largely been the Government’s ‘Help to Buy’ initiative, the second phase of which was recently introduced. Both the mortgage guarantee scheme and the equity loan scheme help homebuyers struggling to save for a deposit to access more affordable rates and get onto the first rung of the ladder.
Micro differences: London races ahead, while regions lag behind
However, almost inevitably, some disparities do arise with schemes designed to benefit the entire nation as a whole – like Help to Buy. Despite progress towards recovery, there remains a prevalent economic divide between the North and South, and while London is driving southern lending forward, the North is still operating in a different gear.
An obvious difference is in house prices. While every region in England and Wales recently reported positive annual house growth for the first time in three years, price rises in the South have vastly outpaced those in the rest of the country, according to the latest LSL House Price Index.
As London’s house prices continue to climb, property in the capital is rising further out the reach of many aspiring homeowners, forcing them either to stick to the rental market or look elsewhere to buy. As a result, the North has necessitated a growth in high LTV borrowers – many of whom are first-time buyers – due to more modest house price growth. Buyers don’t need to save such large deposits to get on the ladder in Northern regions. They can access better mortgage rates with smaller deposits, and are seeing their cash stretch further.
Away from the cash-rich capital, there are also more borrowers taking out high LTV loans as a result of simply having less equity. The result – in November, 19% of loans in North East and Cumbria and 18% in the North West were to high LTV buyers, compared to only 6% in London.
But though there are more high LTV borrowers in the North, total home lending still falls far behind the South. London alone had over 13,200 loan approvals in November, while the North West (an area with a population size comparable to London’s) had little more than half that number (7,100) according to e.surv data.
However, it could be (and is frequently) argued that a significant proportion of home lending in London is driven forward by foreign investors buying into the capital’s property market as a long-term investment. Therefore, total home lending to UK residents in London and the North West is likely to be closer than the average statistic suggests.
Perhaps most surprisingly, there are also more first-time buyers in the capital. More than half (56%) of London home loans were to first-time buyers in Q2, according to the CML. This was 10% more than in the UK overall and the highest since 2007.
North-South divide in repossessions
Regional disparities are also evident in the recovery of the labour market. From July to September the North East saw an unemployment rate of 10%, the highest unemployment rate in the UK according to the ONS; followed by the West Midlands and Yorkshire & the Humber, at 10% and 9% respectively.
This has had a knock on effect on repossessions rates. Although the number of repossessions is falling nationwide, the faster paced economic recovery in the South has led to the North-South divide in repossessions widening to its largest since the financial crisis. In the year to Q2 2013, the North saw 33% more home repossessions than the South, according to e.surv’s latest repossessions research. There were 3.2 repossessions for every 1,000 Northern households, compared just 2.8 in the UK as a whole, and 2.4 in the South. In fact, 72% of towns in the North exceeded the UK repossession average, compared to only 24% of towns in the South.
Micro-regional differences
Moving down a scale further, the rates of recovery are still wildly variable within each region. Take London for example. While the capital’s housing market is surging ahead, with total home lending – and the proportion of first-time buyers – rising more quickly than the rest of the county, there are still pockets of the capital in which homeowners are struggling to meet mortgage repayments, as a result of increasing household costs and rising inflation.
The capital contains the ninth worst town in the UK for repossessions – Croydon – which has a repossession rate of 4.1 per every 1,000 households. And though employment in many major Southern regions is at record highs, the ONS reports that employment rate in the capital falls below the average in the UK, as the population in the capital continues to rise.
Is regional Help to Buy the answer?
So what can be done? The Royal Institute of Chartered Surveyors (RICS) recently called for the government to regionalise the Help to Buy Scheme. They called for a property-led recovery – with greater impetus placed on an increased construction of new homes, as a priority over large infrastructure projects, to help lid racing prices.
Government initiatives have already provided a boost for the mortgage market; but stimulating local economies will ensure that it stays on the fast-track to full recovery. Complementing increased lending demand with more housing stock and tailoring strategies to regional needs will be essential in the months ahead. It will be a crucial step forward in addressing the disparate recovery and ensuring that the difficulties faced by aspiring buyers in the capital are not further exacerbated.
