Thursday, 05 March 2015 00:00

Mortgage lenders get tough on first-time buyers in London

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he sums don't add up for many first-time buyers in London according to new data from the Council of Mortgage Lenders. he sums don't add up for many first-time buyers in London according to new data from the Council of Mortgage Lenders. Photo: Richard Elliott

House prices in London and cautious lenders trigger fall in first-time buyers trying to get on the property ladder.

The number of young couples, families and professionals taking out a mortgage to get on the property ladder in Greater London has fallen for the first time in a year, according to new data from the Council of Mortgage Lenders (CML).

First-time buyers in the capital, who, in part, drove the 2014 surge in demand, drifted away towards between October and December.

They borrowed £2.9bn or 12,000 loans in the final quarter of last year, an 11pc drop in value from the previous three month period and a 4pc drop from the winter of 2013 - despite rocketing house prices last year.

The average age of a individual securing a home loan shifted from 31 to 32 in the last quarter of the year and the income-to-loan ratio dropped back from 3.86 to 3.84 indicating a newly cautious borrower and stricter lending criteria.

"The mortgage market review [introduced in April 2014] really did do its job and slowed the borrowing process down," said Peter Rollings, managing director of the London-based estate agent, Marsh & Parsons.
 There was a hiatus towards the end of the year when people sat back and actually thought about whether they could afford their mortgage, should rates increase, he said.

"This was the main reason the market slowed down."

The CML also reported a fall in the number and value of home loans across all age groups.

The number of home loans approved fell by 15pc to 8,800 in the three month period of October to December and the value fell 20pc to £2.9bn compared to the third quarter.
 New figures from the British Banking Association (BBA), also released this morning, showed that the mortgage market did not pick up in January, but gross mortgage borrowing was 11pc down at £9.8bn on January 2014.

"The volume of transactions in London has slowed with a general election looming and the property market adjusting to the increases in stamp duty. With so much uncertainty, we are not expecting any growth in London values this year but for the first time since 2009 it is a buyer’s market," said buying agent, Paul Pavlides from Prime Purchase.

News from high street lenders TSB, Barclays and Lloyds, may suppress the market further as the three banks reduce acceptable affordability levels.

A note from TBS sent to mortgage brokers today read: "As part of our commitment to being transparent, we wanted to let you know that we’re introducing a loan to income cap of 4.5 times income on all applications, effective from today."

However, Mr Rollings said that following a drop in first-time buyers, there are early signs that that young buyers could come back to the market in their droves.

"Stamp duty changes have meant a busy first two months of the year for this group of buyers. We thought it was going to be quiet in the run up to the election but we have more property under offer than any time in the last 18 months. In the sub £1.5m market it is extremely busy."

A £300,000 studio in Earls Court has just gone under offer and a £350,000 one-bedroom flat in Richmond, he said.

Lending in Scotland and Wales all declined in the last three months of 2014, and Northern Ireland was the only region to record quarterly growth.

The number of loans to home-movers in Northern Ireland increased 7pc by volume and 12pc by value in the fourth quarter compared with the previous three months.

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