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High LTV lending up 52pc

Ryan Fowler

July 10, 2014

There were 10,896 loans above 85% LTV in June 2014, the highest total since April 2008, yet this still stands at a quarter of the 41,745 high LTV deals recorded in February 2007.

Almost a fifth of house purchase lending was to high LTV borrowers in June, compared to one in nine a year ago.

The average loan to value has climbed to 63.6%, its highest level since August 2007.

Richard Sexton, director of e.surv chartered surveyors, said: “A glut of high LTV deals has tempted borrowers back to the market, supporting a flood of first-time buyers over the last year.

“Banks have increased their arrays of high LTV options, reducing prices and helping keep the dream of homeownership alive for the bottom of the market. It was needed.

“The base rate has been stuck at 0.5% for five years. Wages have shown sluggish growth. And the cost of getting onto the housing ladder – and saving for a deposit – has been building.

“More high LTV lending prevented a flat lining of first-timers, at a time when all the odds seemed stacked against them.”

There were 10,898 house purchase approvals to borrowers with a deposit of less than 15% in June 2014, up 12% from the May figure of 9,750.

Measures from the Bank of England’s Financial Policy Committee could curb higher LTV lending, with the limiting of loans issued worth more than 4.5 times a borrower’s income to 15% of new mortgages.

Sexton said: “Assessing each loan application thoroughly and advising buyers on the consequence of borrowing can only be a good thing.

“But simplistic LTI caps are a step too far, and may tip hosts of credit worthy borrowers out of the market.”

First-timers are increasingly looking to purchase more expensive properties, as there were just 12,313 loans on properties below £125,000, 13% lower than June 2013.

The average first-timer purchase price in the London was £267,572 in May according to the latest LSL First Time Buyer Tracker compared to the UK average of £146,887, while the average LTI ratio was also higher.

Over a quarter (27%) of home loans in the North West and Yorkshire were to high LTV borrowers, while London (7%) and South East (12%) had the lowest proportion of high LTV borrowers.

Sexton added: “There is still a considerable amount to do in the housing market. Until we fix the lack of supply, prices will continue on an upward climb.

“Action must be taken soon, or a whole generation of house buyers could lose out. We need to update planning regulation and upscale development, to cater for the accommodation needs of our country.”


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