FTBs drive London lending activity out of seasonal dip

The CML data shows that house purchase lending this quarter was driven mostly by first-time buyers, who made up 57% of all house purchase activity.   

Remortgage lending also saw a rise year-on-year and quarter-on-quarter in amount borrowed and in number of loans.

First-time buyers in London typically borrowed 3.81 times their gross household income, down from 3.83 the previous quarter but more than the UK average of 3.38.

The typical loan size for first-time buyers was £224,994 in the second quarter, up 5% on the first quarter and 6% on the same quarter last year. The typical gross income of a first-time buyer household was £58,685, up 5% compared to the first quarter and 6% up on the second quarter of 2014.

First-time buyers' payment burden in the second quarter was 19.4% of gross income being spent to cover capital and interest payments, down on the first quarter's 20.3% but higher than the 18.4% UK average.

The typical loan size for home movers was £300,999, the first time average new loans have breached the £300,000 mark. The figure was up 3% on the previous quarter and substantially higher than the £160,994 UK average. The typical gross income of a home movers' household was £83,765, up 2% on the first quarter and 1% on the second quarter 2014.

Home movers' payment burden in the second quarter saw them spend 19.3% of their gross household income to cover capital and interest payments, down from 20.1% in the first quarter but higher than the 18% UK average.

Paul Smee, director general of the CML, commented:

"As in the UK overall, the London market came out of the usual seasonal dip in the first few months of the year and saw increased activity; but volumes are still down on the same period last year. Remortgage activity has shown quarterly and year-on-year growth after a period of stagnation. Borrowers appear to be taking advantage of competitive mortgage rates, ahead of the likely interest rate rise."

Aldermore Group Managing Director, Mortgages, Charles Haresnape, said:

"The evidence from today’s data shows homeowners across the whole of the UK are thinking about rates rising. It’s unsurprising that remortgage activity is up in every region and consumers are trying to take advantage of record low rates while they can.

“More widely, a cooling of the London market is welcome and it is pleasing to see a strong recovery across the regions. It does look like confidence is continuing to increase."

Peter Rollings, CEO of Marsh & Parsons, added:  

“Borrowing is moving in the right direction in the capital, but has lost some of its speed, and is still falling short on last year. The capital has been encumbered by top-end taxation changes of late, and this has diluted buyer demand somewhat. While this beds in, London may will be one-step behind of the rest of country in terms of sales activity and house price growth in the coming months.
 
“But this has allowed remortgaging activity to enjoy a moment of glory – showing the only real substantial annual growth in the capital during Q2, as homeowners shop around for the best deal while borrowing rates are so favourable. This atmosphere might well continue for the remainder of this year now Black Monday has made an interest rate rise unlikely before 2016.”