Higher LTV lending represents 16.9% of February house purchase approvals, the largest proportion since September 2014 and there were 10,300 higher LTV loans, a 10.7% month on month increase compared to January.
The mortgage monitor report from e.surv chartered surveyors suggests that the lending market is regaining its momentum.
A breakdown of the figures shows that higher LTV house purchase approvals, that is loans to borrowers with a deposit of up to 15% of the total value of their property, made up 16.9% of house purchase approvals in February, a significant proportional increase from 15.3% in January and just 13.9% in December.
Higher LTV approvals formed the largest proportion of total house purchase lending since September 2014 and as a result, the absolute number of higher LTV approvals has bounced back. There were 10,298 higher LTV loans in February, 10.7% more than 9,300 in January. February also marks the third consecutive month of growth in higher LTV approvals.
The report says that the rise was partly driven by rising property prices. The average purchase price for first time buyer homes climbed to a new record of £160,304 in January, 12% higher than January 2014, according to the latest First Time Buyer Tracker from Your Move and Reeds Rains.
‘Lending to lower deposit borrowers is back on track, which is encouraging as the mortgage market moves into spring. Higher LTV borrowers took a nosedive in October as a proportion of the market after the introduction of loan to income caps became a challenge for first time buyers,’ said Richard Sexton, director of e.surv chartered surveyors.
‘But these buyers are evidently returning to the market to take advantage of low mortgage rates and cheaper stamp duty charges. And after the tricky bedding in phase that accompanied new mortgage legislation, first time buyers are now once again accessing a market restructured for long term viability,’ he added.
He pointed out that the Mortgage Market Review has ensured that all future borrowers are subject to comprehensive affordability checks and given plenty of advice, and so the danger of them defaulting has been reduced. ‘Many prospective borrowers are unable to save up a massive sum for a deposit but they often still have strong monthly incomes and make attractive customers for lenders. Low deposits do not necessarily need to mean high risk,’ he said.
House purchase approvals grew 0.2% month on month in February, with 60,935 approvals, compared to 60,786 in January and 60,349 in December. This improvement comes after a series of drops stretching from July to November 2014, suggesting the market is settling back into sustainable growth.
‘The mortgage market is beginning to warm up, with three months of improvements under its belt. A gently buoyant three months have carried house purchase approvals away from the slump of late 2014,’ said Sexton.
‘The purchase mortgage market is now working with newly introduced legislation to produce growth at a safe and sustainable pace. The reconfigured market has a wealth of checks and balances to ensure that growth occurs in a measured fashion rather than a dizzy burst. Growth is slower than a year ago, but it is more sustainable,’ he added.
On a regional basis the proportion of higher LTV lending has risen from January to February in every UK region apart from Yorkshire, where it fell by 2% and the South East, where it dropped by 1%.
The North West saw the greatest proportion, with 27% of all February house purchase approvals going to borrowers with higher LTV loans. Yorkshire dropped from first to second position, with 26% of loans going to higher LTV borrowers. London trailed far behind, with just 8% of house purchase loans being higher LTV, less than half the UK average.
Sexton explained that people with higher LTV loans are typically first time buyers, looking to make the crucial leap onto that first rung of the property ladder. ‘We can see the effects of Help to Buy taking strongest root in the North. It’s a vital scheme to ensure people are able to become homeowners for the first time while savers struggle to put a deposit together against a backdrop of low interest rates,’ he said.
‘It’s clear that these effects aren’t having quite the same impact in the South. The simplest and most effective answer is to build more houses. The shortage of homes is a problem all over the UK but, as the figures show, especially acute in London and the South East,’ he concluded.
