High LTV lending slows
November had the smallest number of higher LTV borrowers since October 2013. There were 8,250 house purchase approvals to borrowers with deposits worth 15% or less of their property’s value in November 2014 – 12% lower than 9,379 a year ago.
On a monthly basis, higher LTV approvals fell 6.8% from 8,854 in October. The November dip has compounded monthly falls in October (-18.3%) and September (-5.0%) meaning lending to higher LTV borrowers has dropped by almost a third (-30.1%) over the last three months.
As a proportion of the market, higher LTV borrowers – typically first-time buyers – continue to shrink from a five-year peak of 17.8% in August 2014. Their share of total house purchase approvals also dropped in September (17.7%) and October (14.9%) to hit a ten-month low in November (13.5%). This comes as the number of first-time buyer transactions shrank by 12.3% over the last three months according to the most recent First Time Buyer Opinion Barometer from Your Move and Reeds Rains.
Richard Sexton, director of e.surv chartered surveyors, said: “Demand has ebbed from the bottom end of the market.
“After the summer flood of first-time buyers, LTI caps introduced in October stemmed the flow of new borrowers into the mortgage market.
“The Bank introduced these caps against a backdrop of speculation about the market overheating. Now, this wintry cooling is a sign of their pre-emptive action taking effect.”
He also praised the government’s move to reform stamp duty.
He said: “The Chancellor’s changes to stamp duty will make homes cheaper for first-time buyers. This was clearly needed. It means that those first-time buyers left high and dry by the old system are able to buy at last.
“Now that the cumbersome slab system has been replaced with a series of graduated rates, the goalposts have shifted for higher LTV homebuyers.
“Whatever twists and turns the New Year takes, first-time buyers can rest assured that more properties are now within their reach thanks to this long-awaited reform.
“In 2014, Help to Buy put capable homebuyers in a stronger position to borrow. This increased demand, but putting a finger on just one end of the scale simply inflamed the chronic issue of home shortages.
“The slowdown in higher LTV lending is due in part to the depletion of the UK’s stock of affordable housing.
“Suggestions in the Autumn Statement that the government will take direct charge of home provision, from the release of land to the building of new properties, will hopefully even the odds for stifled first-time buyers.”