Saturday 13 July 2013

High LTV lending at near 5 year high

House purchase lending to high LTV borrowers hit a four and a half year high in June, the culmination of a significant improvement in high LTV mortgage availability over the past few months, according to the latest Mortgage Monitor from e.surv, the UK's largest chartered surveyor.
High LTV lending reached a post-financial crisis record in June, hitting their highest level since September 2008. There were 7,046 loans advanced to borrowers with a deposit of less than 15% during the month, up 47% from
4,790 in June 2012.
The improvement in high LTV lending was the catalyst behind a 23% year-on-year increase in total house purchase lending. There were 58,321 house purchase approvals in June, up from just 47,422 in June last year, making it the strongest June for house purchase lending since 2007.
There were 3% more high LTV loans in June compared to May, continuing the trend of high LTV borrowers forming a bigger share of the house purchase market.
The sharp increase in the number of high LTV borrowers in June was the result of a significant and sustained improvement in the availability of high LTV mortgages since the start of the year. Lenders are more willing to grant house purchase loans to borrowers with small deposit, and have introduced a wider range of low rate mortgages into the market aimed at first-time buyers.
The Bank of England's Credit Condition Survey revealed a sustained effort by lenders to increase their high LTV lending in Q2. And the survey revealed that lenders are planning to increase their lending levels to buyers with just a 10% deposit in the third quarter of the year. 
The survey also showed that demand for house purchase loans is picking up, as confidence grows amid an improving economic outlook.
The improvement in high LTV borrowers - most of which were first-time buyers - was reflecting in the growing number of loans on properties under £125,000 in value (typical first-time buyer property). There were 13,975 loans approvals for purchase of property worth under £`125,000, 34% more than this time last year, when there were just 10,433. 
While partly reflecting improving house prices, the increase does this reflect two changes in the market: The first - rising demand, as confidence in the economy returns. The second: more first-time buyer activity, and the wider availability of high LTV loans.
Home loan numbers were flat month-on-month in June, but in May lending levels reached a high not seen for 41
months. Sustained high levels this month confirm that it's a trend rather than a freak high. The average monthly
lending figure over the last twelve months was just 53,248 - June levels were 9% above that average.

Richard Sexton, director of e.surv chartered surveyors, explains: "Last year the lending market was thorny for first-time buyers. Typically, they have less equity, so banks eyed them with caution - property prices need only fall a little before a high LTV borrower falls into negative equity, and the bank stands to lose. 
"But over the last year, lenders have softened the process for them to get a house purchase loan. Buoyed by Funding for Lending, and having had enough time to adjust to regulatory requirements and balance sheet restructurings, banks are more prepared to lend to first-time buyers. They're introducing more products geared specifically for high LTV borrowers, and taking up Government schemes like Help to Buy and rolling them out to the masses."

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