Post-MMR July best for mortgage lending since 2007

Robyn Hall

August 14, 2014

High loan to value lending saw an increase in particular, as year-on-year approvals with a deposit worth less than 15% of the total property value rose by 52% to 11,533.

Based on the data, e.surv concluded that the market has successfully adjusted to MMR regulations.

Richard Sexton, director of e.surv chartered surveyors, said: “After a period of adjustment, the mortgage market has navigated around the regulatory speed-bumps and the lending recovery is firmly back on course.

“Training staff, implementing the new rules and putting in place longer advisory processes caused a slight slowdown in lending in April and May. But lending levels have bounced back, and the bottleneck of approvals stuck in the system has cleared.

“Not only that, the prospect of an interest rate rise is creeping ever closer, and is encouraging more borrowers to lock into cheap fixed-rate deals while they can – which is also pumping up lending volume.”

July 2013 saw 7.5% less purchase approvals at 61,651, while a month before in May 2014 approvals were 6.9% lower at 62,007. Approvals are still a long way away from July 2007 levels, when there were 112,291.

High LTV loans accounted for one in five house purchase approvals in July 2014 compared to 1 in 9 in July 2013, while average LTVs increased from 60.6% to 62.6% year-on-year.

The amount of cheap properties suitable for first-time buyers appeared to decline, as the market recorded 13% fewer approvals on properties worth under £125,000 compared to a year ago.

Sexton added: “Help to Buy has offered one such solution to the problem of saving for a deposit – and encouraged many first-timers back to the market.

“But with several large lenders cutting back on lending through the Help to Buy, many are asking if the scheme has reached its sell-by date.

“If other lenders follow suit, the array of options available for high LTV borrowers will be substantially narrowed, and first-timers may find themselves having to rely even more heavily on the Bank of Mum and Dad – a resource that has been drying up whilst savings rates have remained low.

“It will hit hardest in the capital, where prices, and deposits, have been growing at the fastest pace.”

The North West and Yorkshire contained the highest proportion of high LTV borrowers in July, with 28% and 25% of loans being issued to high LTV borrowers respectively.

In London, the proportion of loans to high LTV borrowers increased by 3% month-on-month to 8%, but this still stands 10% below the national average of 18%.

Sexton said: “Help to Buy is particularly needed in the North of the country – where high LTV borrowers make up a far greater proportion of borrowers.

“The economic recovery has been slowly filtering out to the fringes of the UK, but many areas are still stuck in recovery mode.”

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