High LTV lending soars
The latest mortgage monitor from e.surv suggested lending at loan to values over 85% was at its highest since the financial crisis peaked in September 2008.
In June 7,046 loans were advanced to borrowers with a deposit of less than 15%, up 47% from 4,790 in June 2012.
Richard Sexton, director of e.surv chartered surveyors, said: “Last year the lending market was thorny for first-time buyers.
“Typically they have less equity so banks eyed them with caution. Property prices need only fall a little before a high LTV borrower falls into negative equity and the bank stands to lose.”
Sexton said over the past year lenders have made it easier for a first-time buyer to get a house purchase loan partly through Funding for Lending. Shored up balance sheets have also helped, said Sexton, as well as banks getting used to the new regulatory regime.
This increased appetite to lend to borrowers with smaller deposit drove a 23% year-on-year increase in total house purchase lending. There were 58,321 house purchase approvals in June up from just 47,422 in June last year.
The lending figures were also reflected in the growing number of loans on properties under £125,000 in value.
There were 13,975 loans approvals for the purchase of property worth under £125,000, up a third on this time last year when there were 10,433.
Transaction numbers were flat month-on-month in June but in May the number of loans made reached a high not seen for 41 months.
The average monthly number of loans over the past twelve months was 53,248 but June bucked the trend by rising 9% above that average.
E.surv said the increase in lending is skewed towards the South East and London where more people are able to meet lending criteria.
Remortgaging activity in the South East and London is also high with the firm claiming borrowers with equity are remortgaging to access the better rates on offer helping them to pay down debts.
Sexton said: “Lending has risen hugely since last year it’s true. But there’s a twist in the tale. The increase in lending has been focused in the hot spot of London and the surrounding South East. It’s not a deliberate policy from lenders it’s just a case of there being more equity-rich buyers in the South East.
“Employment levels are higher there than the rest of the country, wage growth is stronger, and it is generally more affluent than all other areas of the country,” he said.
And he added: “Outside of the South East comparatively few people are able to build up a substantial deposit and meet lending criteria. High inflation and rising house prices are bogging down potential buyers and slowing their progress to purchase, by swallowing their savings. The increase in lending is still to filter through to many.”