UK mortgage approvals still falling but wealthier buyers fare best, report shows

It means that the volumes of mortgages offered to wealthy buyers are rising, bucking the market trend, the report from e.surv Chartered Surveyors shows.
 
Regional analysis show sharp fall in volumes in many northern regions, while in the south the mortgage market is more resilient.
 
The number of mortgages approved to buy homes in October shrank to the lowest level since May 2009 on a seasonally adjusted basis, down 18% compared to October 2009, and down 2% compared to September 2010.
 
Remortgage volumes are higher than a year ago, up 7.7%, but remain close to historic lows while the average loan-to-value fell to 56.8%, the lowest level since March 2010, the report also shows.  
 
The fall in the market average LTV was both due to sharp falls in LTVs for low value homes and a shift in the mix of approvals to higher value homes which have much lower LTVs.  
 
For example, homes in the £126,000 to £250,000 price bracket, the average UK home, saw LTVs fall 0.5% in the month to 57.4% indicating tighter borrowing, while those valued between £751,000 and £1 million actually saw lending conditions loosen. Their LTVs rose by 1.6% to 44.4%.
 
There was a big difference in the performance of the market at the top and bottom end.  Loan-to-value ratios are highest on low value homes while borrowers buying higher value homes need much lower mortgages as a percentage of the purchase price. Lower value homes saw fewer mortgages approved while mortgage volumes for more expensive ones actually rose.  The volume of mortgages offered to homes valued below £500,000 fell 8.5% month on month (not seasonally adjusted), while 3% more loans were offered to those buying homes worth more than this amount.
 
‘The Bank of England has just reported a subdued September, but October saw the market slow further. The fall in approvals reflects both reduced demand for mortgages and tighter lending criteria from banks and building societies nervous about the outlook for the housing market,’ said Richard Sexton, business development director of e.surv.
 
‘The squeeze on LTVs is consistent with nervousness among borrowers and lenders, too. It is at the bottom of the housing ladder where these trends are most apparent. Richer borrowers seem much less worried. For them, mortgage volumes are up and lending is getting more generous, mainly because their equity cushion tends to be so much larger,’ he explained.
 
‘The remortgage market is still moribund on a historic comparison. The increase on a year ago reflects the fact that some borrowers are more nervous about the outlook for interest rates, but it is unlikely rates will rise in the short term,’ he added.
 
The mortgage market has fared quite differently by region too with a broad north/south divide, the report also shows. Over the last year, volumes in London and eastern England have fallen just over 13%, whereas in Yorkshire and the north east and Cumbria they are down 44% and 32% respectively. The Midlands saw a 22% decline. The north west bucked the northern trend, falling just 12%, while the south east was out of line with its neighbours falling 28%.
 
‘London’s housing market has been especially resilient as the London economy, buoyed by the financial services industry, has recovered quickly, and as international buyers have driven demand in prime districts. We expect further divergence among the regions as the public spending cuts begin to hit, as they will affect some parts, especially the north, worse than others,’ said Sexton.