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The FTB Market Continues To Strengthen

9th September 2013

The market has strengthened for first-time buyers who accounted for 11,200 of new loans for houses purchased in London in the second quarter of 2013.  Edward Bidwell, of Evolution Warranties said, “This is the highest number recorded since 2007.”

In the second quarter, 56% of house purchase loans were to first-time buyers in London compared to 46% in the UK overall.

Average loan amounts have also increased, in line with prices, up to 6.9% in the capital compared to 2.9% for the UK overall.  £2.4m was advanced to these borrowers in 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 which is almost no difference from 21% in the first quarter of 2013.

However, affordability in London does remain tighter in the UK overall.  With first-time buyers borrowing an average 3.67 times their income compared to the 3.30 for the UK overall during the second quarter.  This could explain why first-time buyers in London are usually putting down larger deposits than 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 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 the 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.

After a quiet year, remortgage lending in London has started to show some growth.  There was £2.4 billion advance 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.

The London market continues to strengthen, however outside London, particularly in the North and North West, house prices remain fairly stagnant.