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London first-time buyer numbers hit 3-year high

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The level of first-time buyers in London hit a three-year high in the last quarter, despite the affordability issues faced by many in the Capital.
London first-time buyer numbers hit 3-year high


The success of the average London buyer is due to age, more parental financial help and a better wage than the UK average, according to the Council of Mortgage Lenders (CML).

In its first London lending report, the CML said 10,000 first-time buyers took out a mortgage in London in the third quarter of 2012. 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.

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, against 80% for the rest of the UK.

London buyers are an average of 31, against 29 across the rest of the UK and have bigger deposits aided by an average salary of £50,000 against £34,000 in the rest of the country. Also, just 28% of FTBs 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.

Providers lent a total of 20,600 house purchase loans, worth £5,070m in Q3, a leap of 22% on the previous quarter and 4% up, year-on-year. This is the highest figure since Q4 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.

CML director general Paul Smee, 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.”

Meanwhile, in Wales house purchase loans to all buyers also rose in Q3, showing a similar but slower trend to the rest of the UK, with 5,900 loans for house purchase.

In Scotland, purchase loans rose by 6%, also slower than the rest of the UK, but up 9% on last year, but lending to first-time buyers also hit a three-year high.

But in Northern Ireland, purchase loans reached an annual high at 21% higher than Q2, but 4% down on 2011. By value, £210m was advanced for house purchase loans up from £170m in the previous quarter.

“After years bumping along the runway, the mortgage market is slowly, and fitfully, taking off,” said Adam Davies, founder of the Cardiff-based mortgage specialist InTouch Financial Solutions.

“There is plenty of supply on tap, with lenders finally ramping up the number of high-LTV products available. The demand for remortgages has nosedived – a problem that has hit Wales particularly hard.

“So for the market to be climbing at all is a testament to the price war which has started in the fixed-rate mortgage market.”

However, he said criteria remains as tough as ever from many lenders and would-be buyers continue to sit on their hands.

“The mortgage market is airborne once again – but with such instability in the housing market, there could easily be more turbulence ahead,” he added.

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