Gross lending in Q2 hits six year high

Nia Williams

September 10, 2013

The 23% rise is the highest Q1 to Q2 increase since the series began in 2007.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “As expected the volume of gross advances in the second quarter rose but the increase was the greatest seen since records began six years ago.

“Funding for Lending and Help to Buy are resulting in cheaper mortgage rates which is encouraging borrowers to finally take the plunge. Growing confidence in the housing market as prices rise, particularly in London and the south-east, is also stoking the market.”

Meanwhile net advances in quarter two this year reached £5.1bn, 8.6% higher compared with the same quarter in 2012.

And there was a 19.3% increase in the value of new commitments to £47.5bn when compared with quarter two 2012 – the largest quarterly amount of new commitments since quarter three 2008.

Loans for home purchases accounted for 65% of new advances, a rise of 1.6% on the previous quarter. First-time buyer lending increased by £1.9bn, 31%, over the past year to £8bn.

But remortgages fell back in quarter two to 28.3% of new lending.

The value of residential loans outstanding in quarter two increased slightly by 0.1% from the previous quarter to £1,330bn.

Buy-to-let lending surged forward from £3.9bn in quarter two of 2012 to £5bn in quarter two 2013.

The overall average interest rate on gross advances decreased from 3.65% in quarter one this year to 3.47% in quarter two, again achieving a record of the lowest interest rate since the series’ inception.

Harris said: “More borrowers are opting for fixed rates which is no surprise when you consider just how cheap they are.

“However while there is potential for further reductions the likelihood of rates rising is higher so borrowers should consider moving now rather than waiting for already historically low rates to fall further still.”

High loan to value lending, over 90%, increased from 2.1% in quarter one to 2.5% in quarter two this year as a proportion of overall lending.

This trend continued in the increase in gross lending to high joint income multiple borrowers, classified as those who require three times their joint income. In quarter two this increased by 1.7% from quarter one accounting for 24.8% of gross lending.

Overall, the proportion of new lending done at a combination of high LTV and high income multiples increased to 1.6%, a level last recorded in Q2 2009.

Harris added: “More first-time buyers are returning to the market with a small increase in those borrowing more than 90% LTV. With the Help to Buy scheme guaranteeing loans for buyers with modest deposits we expect this trend to continue.

“While George Osborne has stated that high LTV mortgages are not “exotic weapons of mass destruction” borrowers must still ensure that they can afford a high LTV mortgage before taking the plunge.”

The number of new arrears cases was 12% lower than the previous quarter at 32,500 while the total number of loan accounts with reportable arrears also decreased to 292,200 in quarter two 2013.

The number of new cases taken into possession totalled 7,795 in quarter two which was a 10% reduction on the same quarter last year.

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