Figures from the second quarter 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. £2,490m 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 3.30 for the UK overall in the second quarter. 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 £5.1bn 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 £2.6bn 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.
Commenting on the data, CML director general Paul Smee said:
"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.
"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."