Home buyer borrowing in London reduces 5% or £310 million in the final quarter of 2016 continuing the downward trend for the capital.

The latest research from the Council of Mortgage Lenders (CML) showed the value of mortgage loans advanced by lenders reduced from £6.16 billion in the third quarter to £5.85 billion in the last quarter of 2016.

For the fourth quarter first time buyers borrowed £3.0 billion down by -3.5% and home movers £2.8 billion significantly lower by -21.0% on the previous quarter.

In London over the year the value of loans for the fourth quarter 2016 has reduced £0.86 billion or -12.8% from £6.71 billion in 2015.

Number of loans have reduced

Paul Smee, CML director general said the number of home buyers in London fell to a four year low in 2016 with home mover activity continued a downward trend, with the fewest loans since 1991.

Loans in the fourth quarter were 7,400 down -6.3% on the previous quarter and -24.5% compared to the same quarter in 2015.

First time buyers fared much better with 11,000 loans and down only -1.8% on the previous quarter and -6.8% compared to last year.

Persisting supply and affordability issues appear to be exerting an ongoing restraint on growth, meaning there is some uncertainty around how the market will perform going into 2017.

There has also been a slowdown in new purchases for buy-to-let investors after changes to stamp duty tax and taxation allowance on mortgage interest gradually introduced over 4 years from April 2017.

Higher activity from older homeowners means the equity release mortgage buyers accessing wealth in their property to maintain their lifestyle, or give to a family member.

Remortgage buyer resurgence

By contrast, remortgage activity appears to be experiencing a resurgence as competitive mortgage rates aided by low interest rates have sparked remortgage levels not seen in the Capital since 2008, said Mr Smee.

The change over one year shows the number of mortgage loans for remortgage buyers increasing from 48,900 in 2015 to 55,500 in 2016, a rise of 13.5%.

In terms of value, this has increased significantly from £13.7 billion in 2015 to £16.5 billion in 2016, a rise of 20.6% or £2.8 billion.

There has been little change in affordability for first time buyers with the typical income multiple, the amount borrowed in relation to income, in London of 4.02 compared to the UK average of 3.56.

First time buyers typically borrowed £254,000 based on average household income of £63,700 compared to the UK overall with house price of £135,000 and £40,200 income.

For home movers the  typical borrowing was £335,000 with household income of £87,300 compared to the UK overall with house price of £172,500 and £54,900 income.

Income multiples for home movers in London were unchanged at 3.97 compared to the UK average of 3.29.

What are your next steps?

Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.

Learn more by using the equity release calculator, mortgage monthly cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.

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