News Column

Largest Quarterly Number of First-Time Buyers in Scotland Since 2007

August 27, 2014



LONDON, Aug. 27 -- The Council of Mortgage Lenders issued the following news release:

New CML data on the characteristics of lending in Scotland in the second quarter of 2014 show it remains driven primarily by lending for house purchase, with remortgage activity showing year-on-year decline.

Quarterly highlights:

* In the second quarter, there were 7,500 first-time buyer loans in Scotland - 29% up on the previous quarter, and 23% up on Q2 2013. First-time buyers in the period borrowed GBP 790 million - up 39% on the previous quarter and 32% on Q2 2013.

* At 8,600 loans, there were 34% more home-mover loans in the second quarter than the first, and 12% more than in Q2 2013. The value of home-mover lending was GBP 1.2 billion, up 41% on the first quarter and 18% up on the second quarter 2013.

* Remortgage lending in the quarter declined in Scotland compared to the previous quarter and the same quarter in 2013.

Lending for home-owner house purchase

House purchase lending to home-buyers increased quarter-on-quarter in Scotland totalling 16,100 loans, up 32% compared to the first quarter and the value of these loans totalled GBP 2.2bn, a rise of 38% on the first quarter. Compared to the second quarter of 2013, the number of loans increased by 17% and the value of lending by 22%.

Chart 1: House purchase lending in Scotland: Year-on-year % change in Scotland compared and the UK

Click here to view graph (http://www.cml.org.uk/cml/files/images/26.08.14-scotland-house-purchase-yoy-graph.png)

Lending to first-time buyers

First-time buyer affordability changed fractionally, with first-time buyers typically borrowing 2.98 times their gross income, unchanged compared to the first quarter and less than the UK average of 3.46. The typical loan size for first-time buyers was GBP 95,000 in the second quarter, up from just under GBP 90,000 in the previous quarter. The typical gross income of a first-time buyer household was GBP 32,300 compared to GBP 30,700 in the first quarter.

The relatively low level of interest rates saw first-time buyers' payment burden remaining relatively low in the second quarter at 16.7% of gross income being spent to cover capital and interest payments, a smaller proportion of income than the 19.4% UK average and 16.9% in the first quarter.

Chart 2: Lending to FTBs in Scotland, number of loans advanced, and lending to FTBs in Scotland as a proportion of the UK total

Click here to view graph (http://www.cml.org.uk/cml/files/images/26.08.14-ftb-scotland.png)

Lending to home movers

In the second quarter of 2014, lending to home movers showed similar growth patterns in Scotland to first-time buyer lending.

Home mover affordability changed fractionally, with home movers typically borrowing 2.69 times their gross income compared 2.66 in the first quarter and to 3.09 for the UK overall. The typical loan size for home movers was GBP 128,600 in second quarter, up from GBP 120,500 in the previous quarter. The typical gross household income of a home mover was GBP 49,100 in second quarter compared to GBP 47,400 in first quarter.

Home movers' payment burden remained relatively low in Scotland at 17.2% of gross income being spent to cover monthly capital and interest payments, less than the 17.3% in the first quarter and the 18.7% UK average.

Lending to home owners for remortgage

Remortgage lending in Scotland declined compared to both the first three months of the year , and the same quarter last year. Home-owner remortgage lending in the second quarter totalled 5,700 loans advanced in the period, which was a decrease of 7% on first quarter and down 20% on the second quarter 2013. These loans totalled GBP 630m in value, a decrease of 6% quarter-on-quarter and down 13% compared to Q2 2013.

Chart 3: Remortgage lending in Scotland compared to the UK, year-on-year % change

Click here to view graph (http://www.cml.org.uk/cml/files/images/26.08.14-scotland-remortgage-graph.png)

Linda Docherty, chair of CML Scotland, commented:

"Lending in Scotland has remained robust this quarter, despite the introduction of new FCA mortgage market rules. We will, however, need more time to understand the full effect of the new rules. House purchase lending has been the main catalyst of increased activity, with larger quarter-on-quarter growth in Scotland than the UK overall. The comparatively favourable conditions in the Scottish market has meant that first-time buyer numbers continue to grow to levels not seen since 2007."

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