London first-time buyer mortgage borrowing at 10-year high

Borrowing by first-time buyers in London has reached its highest level in a decade despite challenges over affordability, according to UK Finance.

Borrowing by first-time buyers in London has reached its highest level in a decade despite challenges over affordability, according to UK Finance.

First-time buyers took out home loans worth £3.31bn in the third quarter of 2017 – up seven per cent on the previous quarter and nine per cent on the third quarter of last year.

They typically borrowed £275,000, up from £268,747 in the previous quarter, with the typical income multiple rising from 4.02 to 4.06 – higher than the UK average of 3.61.

Home buyers borrowed £6.74bn for house purchase, up 10 per cent quarter-on-quarter and 13 per cent year-on-year.

The capital’s home movers borrowed £3.44bn, up 14 per cent quarter-on-quarter and 17 per cent compared to a year ago, while remortgaging activity rose 15 per cent on the second quarter and four per cent compared to the same quarter last year to reach £4.49bn.

The rises come amid a slowdown in London house prices, which declined by 0.2 per cent in September, according to the Office for National Statistics.

While prices have been flat or falling in the most expensive areas of the capital, strong rises can still be witnessed in some of the more affordable boroughs.

Yesterday (22 November), chancellor of exchequer Philip Hammond used the Autumn Budget to cut stamp duty for the majority of first-time buyers – a move that is set to benefit those in London and the south-east, where property prices are high.

UK Finance’s head of mortgage policy June Deasy said: “Affordability remains challenging in London, but borrowing by first-time buyers grew strongly in the third quarter and reached its highest level for a decade.  

“Borrowing by home movers grew even more strongly, but remained below its recent peak in the first quarter of 2016, when activity was boosted by the impending increase in stamp duty.  

“Remortgaging was also robust as London borrowers sought to lock into historically low borrowing rates ahead of the widely anticipated increase in base rate.”

Wales also witnessed strong activity, with home buyers borrowing £480m, up 12 per cent on the second quarter of 2017, and first-time buyer activity climbing by 8 per cent to £260m.

Home movers borrowed £220m, up from 16 per cent the previous quarter, while remortgaging was flat on the previous three months at £220m.

In Northern Ireland, home buyers borrowed £480m, up 12 per cent on the second quarter of 2017, with first-time buyers borrowing eight per cent more and home movers 16 per cent more.

Remortgaging was flat compared to the previous quarter but up 10 per cent year-on-year.

Scotland bucked the trend, with housing activity largely flat in the third quarter.

The exception was remortgaging activity, which totalled £980m – up eight per cent on the second quarter and nine per cent on the same quarter last year.

Alistair Murdoch, IFA at London-based Aurora Financial Solutions, said he was a bit surprised by the strength of the capital’s market.

He commented: “It is more and more difficult for first-time buyers to get on the property ladder. The government has tried to help with Help to Buy and now the stamp duty measures. That will increase demand, but affordability is making it more and more difficult in London.

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