House Purchase Loans hit a Six Year High, but High LTV Lending dips in December

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December was the best month for home lending in six years, according to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor.

There were 77,918 loans advanced to homebuyers in December, the highest number since November 2007. It marked a 40% increase in home loans over the past year, a jump of more than 22,000 approvals from 55,501 in December 2012. Compared to November, home loans increased 10% from 70,758. It was the tenth monthly increase in a row and the largest monthly increase in two years.

Despite an increase in total lending, the volume of lending to high LTV borrowers dipped in December. In the final month of 2013 there were 9,038 loans to borrowers with deposits worth 15% or less of the total value of their property, a 5% decrease from 9,493 in November.

However, high LTV lending is still far higher than this time last year. While total lending has increased by 40% over the last 12 months, high LTV lending has increased at an even faster rate, rising by 60% from 5,661 high LTV loans in December 2012. The figures also show there is still a way to go before high LTV lending will come close to pre-recession levels, with four times as many monthly high LTV loans before the recession, suggesting lending to borrowers with smaller deposits could still be ramped up significantly.

Richard Sexton, director of e.surv chartered surveyors, explains: “There is still a long road to travel before the mortgage market is fully recovered from the hangover of the financial crisis. But the recovery is quickening, and the end is beginning to appear on the horizon. High LTV lending has exploded in the past 12 months, and it is now far easier to take out a mortgage with a smaller deposit saved. There has been something of a festive dip in high LTV lending in the last month, likely to be the result of lower equity borrowers paying for Christmas and delaying their move until the New Year. High LTV lending should continue its recovery in the coming months, but it’s important that Help to Buy remains in place to help support borrowers in building a deposit, enabling them to access better rates, and cheaper deals.”

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2013 has been something of a tale of two halves, with the recovery in lending stepping into a new gear in the second half of 2013. House purchase lending increased just 6% in H1 2013, going on to increase by 32% in H2 2013. The recovery in high LTV lending was more evenly spread throughout the year. High LTV lending increased 26% in H1 2013, and a further 27% in H2 2013.

Richard Sexton, director of e.surv chartered surveyors, explains: “The mortgage market had a bumpy beginning to 2013, as fears of a triple-dip recession reigned supreme, and banks were cautious about lending. But while the first half of the year witnessed a moderate uptick in lending, with the seeds of the economic recovery beginning to sprout, the second half of 2013 saw the mortgage market grow at an electric rate.”

More first-time buyers

The number of loan approvals on properties up to the value of £125,000 has increased by 34% in the last year, with 15,584 loans on properties valued £125,000 or under in December 2013, compared to 11,655 in December 2012. It reflects a pick-up in the market, and an increase in the number of lower equity borrowers choosing to move-home or buy for the first-time.

The number of first-time buyers in November 2013 was 28% higher than in November 2012, according to the latest LSL First Time Buyer Tracker, as mortgage rates fell to 3.93% – the lowest on record. But there are warning signs ahead. The average first-time buyer purchase price rose 11% over the year to November, to £149,404.

Richard Sexton, director of e.surv chartered surveyors, explains: “More high LTV borrowers and first-time buyers are looking to buy property now than any other time post financial-crisis. But they are having to fork out more than ever, as prices are driven up by the intense competition for property. Traditionally, first-time buyers have turned to their parents for help building the cash for a deposit – a deposit that is growing larger as prices rise. But inflation has eaten away at many parent’s cash reserves, and this well is beginning to dry up. In order to keep the market accessible for everybody, house building must be ramped up, to prevent the challenge of saving for a deposit form becoming even more difficult.”

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