The market is the sum of its regions

Julian Wadley MS blog

It has now been a year since we first started publishing data for the national markets of Wales and Northern Ireland to accompany our Scottish release. In November last year, we also started publishing a quarterly report on lending in London.

Recently, a healthy number of column inches have been spent highlighting the growing chasm in house prices between the south east and the rest of the country.

But what these reports do not often do is contextualise just how the individual housing markets differ in terms of other factors, such as mortgage affordability.

Take, for example, the situation in Northern Ireland. A steep fall in house prices has led to an erosion in equity for those borrowers looking to move home, but lower house prices have made mortgages more accessible and more affordable for first-time buyers than many other parts of the country.

In 2012, first-time buyers in Northern Ireland borrowed an average of 2.98 times their income, compared to 3.26 in the UK overall, while mortgage payments typically consumed 19.3 per cent of borrower income, lower than the 20.1 per cent in the UK.

But despite the more favourable affordability conditions in Northern Ireland, the largest yearly rise in first-time buyer activity actually occurred in London where the number of first-time buyers entering the market in 2012 pushed past 37,000, compared to 5,100 in Northern Ireland.

And even though London has the lowest level of home ownership in the UK (50 per cent), it still accounted for 28 per cent of all the value of all first-time buyer lending in the country.

Not surprisingly, affordability for first-time buyers was also stretched further in the capital.

Borrowers took out an average of 3.60 x their income in London in 2012 and the average LTV ratio still sits at 75 per cent.

Cross the Severn Estuary to Wales and the average LTV hit 85 per cent in 2012, the highest in the UK.

The UK mortgage market is not a single homogenous mass but an ever-changing market driven by regional, sub-regionall and local conditions. Policy makers, the regulator and lenders themselves have to take that into consideration when thinking about the mortgage market of the future.