Last month saw the strongest July for house purchase lending since the financial crisis, according to chartered surveyor E.surv.
There were 66,279 house purchase approvals this July, 7.5 per cent higher than the 61,651 approvals last July, although the latest figure was still well off July 2007 when there were 112,291.
On a monthly basis, house purchase approvals topped 66,000 for the second consecutive month, suggesting the mortgage market is adjusting to the introduction of Mortgage Market Review regulations.
Monthly mortgage approvals were 6.9 per cent higher compared to May - the first full month in which lenders had to be fully compliant with the new rules.
Richard Sexton, director of E.surv chartered surveyors, stated that the mortgage market has navigated around the regulatory changes and the lending recovery is back on course.
“Training staff, implementing the new rules and putting in place longer advisory processes caused a slight slowdown in lending in April and May, but lending levels have bounced back and the bottleneck of approvals stuck in the system has cleared.
“Not only that, the prospect of an interest rate rise is creeping ever closer, and is encouraging more borrowers to lock into cheap fixed-rate deals while they can – which is also pumping up lending volume.”
High loan to value lending continued to drive the market forward last month, with 11,533 loans to borrowers with a deposit worth 15 per cent or less of the total value of their property, 52.1 per cent more than 7,583 twelve months before.
However, a dwindling supply of the most affordable properties is forcing more borrowers, particularly first-time buyers, to take out larger loans. There were 13,256 approvals on properties worth £125,000 or less in July 2014, 13 per cent fewer than 15,244 twelve months before.
Bank willingness to lend to high LTV borrowers has ensured the first-time buyer market has stayed strong.
There were 30,000 more first-time buyers in the first half of 2014 than in the equivalent period in 2013, according to LSL Property Services.
Mr Sexton said that Help to Buy has offered a solution to the problem of saving for a deposit and encouraged many first-timers back to the market.
“But with several large lenders cutting back on lending through the Help to Buy, many are asking if the scheme has reached its sell-by date. If other lenders follow suit, the array of options available for high LTV borrowers will be substantially narrowed, and first-timers may find themselves having to rely even more heavily on the bank of mum and dad.”
The Bank of England’s Financial Policy Committee recently announced further regulation for the mortgage market, with banks having to limit lending to buyers at income ratios of 4.5 or above to 15 per cent of the total number of mortgage loans from the 1 October.
