New CML data shows a dip in mortgage lending to first time buyers as Savills predicts house prices in London to stall next year.

According to the Council of Mortgage Lenders (CML) mortgage approvals for first time buyers is lower by 3% from the previous month and is at 26,800 in September.

The figure remains 16% higher when compared to the same month last year. In addition the CML data shows home movers have also reduced compared to August.

The CML has said homebuyers are more cautious about over extending at a time when interest rates are expected to increase.

Greater competition from buy-to-let investors has increased the purchase price and reduced the supply of suitable properties for first time buyers or home movers.

London housing market slowdown

Property company Savills is expecting the London property market to stall next year following the current slowdown in mortgage lending.

The capitals surge in house prices in the last few years leaves little room for further rises next year. However, Savills predicts by 2019 London house prices are expected to be 10.4% higher than today.

For luxury London properties in Belgravia, Kensington, Knightsbridge, Mayfair and Hampstead prices are likely to fall in 2015 due to the election and risk of property taxes.

Even so Savills expects properties at the higher end of the market to rise 23% by 2019.

Rising house prices allows the equity release buyer to access money using a lifetime mortgage and use this to consolidate debt, for home improvements or holidays.

Without family help to upsize, the only option is for remortgage buyers to stay in their existing home and continue saving more for a bigger deposit.

Properties outside London below their peak

The rise in property prices has still not reached areas outside of London. Once the capitals figures are removed, UK house prices remain 16% below the peak in 2007.

Data from the Land Registry shows average UK prices are £177,299 and excluding London this figure is £133,538. This is lower than the peak in December 2007 when the average was £158,194.

Savills expects house prices to rise across the UK by 19.3% over the next five years. The highest growth areas will be outside of London with the south-east of England rising by 26.4% and the east of England with a 25.2% rise by the end of 2019.

The private rental sector is also expected to increase. Currently a fifth of all households are renting and this is expected to rise to a quarter by 2020.

If the current rate of new build homes does not improve, the number of first time buyers under the age of 35 is expected to fall to one in six compared to one in four today.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

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

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to buy a more expensive home or gift to a family member or friend.

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