Lenders tightening criteria
Figures filed with the Financial Conduct Authority by regulated lenders showed gross advances of £45.6bn were recorded in Q1 2015, 3.2% lower than Q1 2014 and 11.1% lower compared with Q4 2014.
The proportion of gross advances at a loan-to-value over 90% decreased by 0.4 percentage points over the quarter to 3.3% in Q1 2015.
And the proportion of gross advances that were a combination of an LTV over 90% and loan-to-income multiple of over 3.5x for single income borrowers (or 2.75x for joint income borrowers) also fell over the quarter by 0.4 percentage points to 2.1%.
Meanwhile the proportion of gross advances to borrowers with a single income multiple of more than 4.00x decreased by 0.6 percentage points to 9.1% in Q1 2015.
Tighter criteria appeared to have encouraged lenders further into a rate war with the overall average interest rate on gross advances falling by 25bps, from 3.26% in Q4 2014 to 3.01% in Q1 2015. This is the lowest interest rate on gross advances since the series began in 2007.
Patrick Bamford, director of mortgage insurance Europe at Genworth, said: “It is clear from today’s data that more needs to be done to boost access to high LTV mortgages and support homeownership ambitions. The fact that both first-time buyer and high LTV activity are visibly waning suggests that, without the Help to Buy mortgage guarantee incentivising lenders, we would be looking at a far steeper decline.”
Buy-to-let lending appetite grew strongly however from £6.8bn advanced in Q1 2014 to £7.6bn in Q1 2015 but was unchanged from Q4 2014.
The number of new arrears cases in Q1 2015 was 22,001. This was 4.0% lower than in Q4 2014 and was the lowest since the series began in 2007.
However the performance of loans in arrears – payments received as a percentage of payments due – decreased from 62.9% in Q4 2014 to 62.0% in Q1 2015.
New cases taken into possession totalled 3,179 in Q1 2015, a 23.7% reduction from Q4 2014. The stock of possession cases remaining unsold also decreased to 6,454 in Q1 2015, the lowest since the series began in 2007.
In May Lloyds Banking Group admitted it had extended its moratorium on possessions following a High Court ruling in Northern Ireland condemning its possession processes.
The Council of Mortgage Lenders published a note at the time which said: “For technical reasons relating to lenders’ processes, the number of repossessions in the first quarter may be showing an overstated reduction.
“Subsequent quarters may therefore show a compensating effect, but the overall underlying trend is one of continuing gentle downward movement.”
The most recent figures from the CML show Lloyds Banking Group had a 20% share of the gross lending mortgage market in 2013.