The number of first-time buyers getting on the London property market increased by 15 per cent in 2012, the greatest growth seen for five years.
The figure grew to 27,300 in 2012, up from 32,400 the previous year, according to data from the Council of Mortgage Lenders.
A 4 per cent increase in first-time buyers purchasing a home in the capital was seen in the fourth quarter of 2012, compared to the previous quarter, and up 17 per cent on the same period in 2011.
A total of 10,200 FTBs bought their first home in London, representing a larger boost compared to the UK overall, where lending to FTBs increased by 14 per cent compared to the previous year.
It was also the largest single quarter for first-time buyer activity since the last quarter of 2009 – when activity was boosted prior to the end of the previous stamp duty holiday.
First-time buyer affordability in London remained tighter than in the UK overall. First-time buyers in London borrowed an average of 3.59 times their income in the fourth quarter and their mortgage payments typically consumed 21.2 per cent of their income. This compares to an average income multiple of 3.26 and 20 per cent of income taken by mortgage payments for all first-time buyers in the UK.
First-time buyers in London also put down larger deposits than in the UK overall. The average loan to value ratio remained at 75 per cent in the fourth quarter and 2012 overall, compared to 80 per cent in the UK.
Half of all first-time buyers in London bought properties priced between £125,000 and £250,000.
As in the rest of the UK, lending to home movers in London fell in the fourth quarter. A total of 9,600 loans (worth £2.6 billion) were advanced to home movers in London, a 7 per cent fall compared to the third quarter, but up by 4 per cent compared to the fourth quarter last year.
The dip in the last quarter of the year did not counter the improvement seen earlier in the year. Overall, lending to home movers increased by 4 per cent in 2012 with 37,200 loans advanced compared to 35,600 loans in 2011.
Total house purchase lending fell in the fourth quarter compared to the previous quarter but stronger compared to the same period in 2011. 19,800 loans were advanced in the last quarter of 2012, down from 20,100 in the third quarter, but up by 11 per cent compared to the fourth quarter in 2011 (17,900 loans).
Commenting on the data, CML director general Paul Smee said:”These figures show that first-time buyers in London are regaining their confidence and returning to the market. Even though property in London remains more expensive than in the rest of the UK, low interest rates and the increased availability of high loan-to-value mortgages for borrowers with smaller deposits has enabled more aspirational homeowners to enter the market than any time in the last five years.”
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