Small deposit loans gain momentum in April

The latest Mortgage Monitor from e.surv has found that during April there were 10,112 house purchase loan approvals for borrowers with deposits worth 15% or less of their property’s total value – typically first-time buyers.

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Warren Lewis
14th May 2015
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Despite this, house purchase approvals fell year-on-year, suggesting that higher LTV lending is helping to support total mortgage approval figures.

In the total market, there were 1.9% fewer approvals for house purchase loans in April than there were last year: 62,035 loans, down from 63,236 in April 2014.

As a proportion of total approvals, higher LTV lending now stands at 16.3%, compared to 15.5% in March and 14.9% in April last year. This is despite the most recent First Time Buyer Tracker from Your Move and Reeds Rains finding that Q1 2015 was the worst opening quarter for first-time buyers in two years, with just 60,900 transactions recorded.

On a monthly basis, house purchase approvals increased 1.1% from March, when there were 61,341 house purchase loan approvals.
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Richard Sexton, director of e.surv chartered surveyors, suggests that borrowers with smaller deposits are making a welcome comeback, thanks to increased accessibility in lending, improving wages and highly attractive mortgage rates.

"This revival of the bottom of the market is becoming ever more crucial – and this showed in the recent election struggle, with all the main parties placing helping first-time-buyers as one of the crucial components of their campaigns.

However, before concerns are raised regarding the increase in higher LTV lending, it’s worth putting these numbers in context. The number of higher LTV house purchase approvals is still only a quarter of what it was in 2007. This is a healthy upturn in higher LTV lending, not a symptom of any malady in the mortgage market.

David Cameron has outlined a plan to provide 200,000 cut-price starter homes, alongside a commitment to unlocking brownfield land for building new homes. This is the kind of clearplanning the property market needs –it is to be hoped that the proposals crystallise into real policies.”

The proportion of higher LTV lending has either increased or remained stable in most UK regions in April.  However, Scotland saw just 12% of house purchase approvals for borrowers with smaller deposits in April, compared to 16% in March.

At the other end of the spectrum, house purchase approvals for this bracket surged ahead in the Northwest, rising to 24% as a proportion of approvals in April from 21% in March.

Richard Sexton explains: “In the wake of MMR last year, we saw five consecutive months of dips. We turned a corner at the start of this year, and lending is starting to find its feet again in the new regulatory landscape. This should be even more of a spur to the government to push forward their plans for homebuilding, as a continual demand for home-ownership places ever more pressure on Britain’s insufficient stock of homes.

There has been a striking downturn in the proportion of higher LTV borrowers north of the border over the last month. With the Scottish National Party enjoying a landslide triumph, the Government will need to pay heed to this section of the property market, particularly with employment in Scotland more heavily dependent on the public sector than the rest of Britain. Many regions of Scotland are taking longer to come back from the recession. It’s not enough to look at the North West and Yorkshire and say that government schemes are reaching the areas that need them. In Scotland in particular, higher LTV lending would be welcomed by many.”

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