The key findings from the report are as follows:
The proportion of lending for house purchase in Q3 2014 was 71.8% of total residential loans to individuals, approximately 1.7 percentage points higher than in Q2 2014. The amount of gross advances for house purchase was 20% higher compared with Q3 2013 at £40.1 billion.
The proportion of lending to first time buyers decreased by 0.4 percentage points to 21.7% in Q3 2014 after reaching the series peak in Q2 2014. The value of residential loans advanced to first time buyers increased over the quarter to £12.1 billion, the highest quarterly amount since Q3 2007.
The proportion of gross advances at a loan to valuation (LTV) of over 90% decreased by 0.3 percentage points over the quarter to 4.3% in Q3 2014. The proportion of gross advances to borrowers with a single income multiple of more than 4.00x decreased by 1.1 percentage points to 10.8% in Q3 2014, after having increased for five quarters in succession. The proportion of gross advances to borrowers with joint income multiple of more than 3.00x decreased slightly by 0.2 percentage points since Q2 2014 to 28.6%.
The proportion of gross advances that is a combination of an LTV over 90% and loan-to-income multiple of over 3.5x for single income borrowers (or 2.75x for joint income borrowers) decreased over the quarter by 0.3 percentage points to 3.1%, having increased for the previous three successive quarters.
Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), said:
“Lending volumes for Q3 show there is plenty of life left in the market following the Mortgage Market Review (MMR), with lenders firing on all cylinders to record the largest total advances in any third quarter since Q3 2008. This is a positive sign for consumers, who are benefiting from improved access to mortgage finance despite tougher affordability checks.
Lenders are currently tripping over themselves to win business, with many of the major providers locked into a mortgage rate war. This is providing consumers with historically low pricing: it’s therefore unsurprising that so many are choosing to lock into preferential deals, with MLAR statistics showing the proportion of advances at fixed rates is at its highest since tracking began in 2007. This preference for fixed rate deals is likely to increase as consumers seek to protect themselves from an expected interest rate hike in 2015.
The signs certainly look positive as we approach the end of what has been a restorative year for the UK mortgage market. While there are still a number of economic uncertainties on the horizon, and we may be yet to see the full impact of regulatory changes, consumers are now in a better position to access affordable mortgage finance than they were a year ago.”
Simon Crone, Vice President – Mortgage Insurance Europe for Genworth, comments:
“Today’s figures confirm that high loan-to-value (LTV) mortgages can play a vital role in the post-MMR market. Despite falling slightly from Q2 to Q3, lending activity at 95% LTV was significantly stronger than it was a year ago. Given that rigorous affordability checks are in place across the market, it proves that it is perfectly possible to lend prudently to borrowers with deposits as low as 5%.
Great strides have been made this year to put the mortgage market on a surer footing. Now this secure platform is in place, efforts must focus on ensuring that first time buyers are not marginalised again. Despite recent progress, high LTV activity is still over-reliant on the Help to Buy mortgage guarantee, which accounted for nearly half of the products available at 95% LTV in Q3.
It is no wonder that first time buyer numbers remain historically subdued when the products they have traditionally relied on are still in short supply. Whatever comes of next year’s election, it is vital that the lending community puts its weight behind the high LTV market in 2015 to ensure a higher volume of prudent first time buyer lending.”
David Newnes, director of Your Move and Reeds Rains estate agents, had this to say: “Overall house purchase lending has gained much ground compared to last year, as the UK property market continues its offensive back from the recession. Particularly in the first half of 2014, initiatives like Help to Buy and higher-LTV lending provided welcome relief for potential first time buyers combatting stagnant interest rates on their savings and underwhelming wage growth in their quest for a deposit.
The loan-to-income caps could become a potential sticking point for first-time buyers, and layers of mortgage regulation are threatening to further dampen demand for homes. However, the Government has extended an outstretched hand to aspiring buyers with last week’s stamp duty reform, which is a welcome gesture for the lower rungs of the housing ladder.”
