House purchase approvals perked up in October to 61,952 after three consecutive months of slowdown, as the market shows signs of stablising, according to chartered surveyor E.surv.
The 1.1 per cent increase from September is the first monthly growth since the end of the second quarter, although there were 9.2 per cent fewer house purchase approvals compared to October 2013.
This is the largest annual decrease since August 2012 and makes October 2014 the second consecutive month in which house purchase approvals have fallen on an annual basis.
Richard Sexton, director of E.surv, explained that the purchase mortgage market is self-correcting to operate at a more constant, stable pace, in line with the aims of the Mortgage Market Review.
“Now that regulatory changes have tightened up the nuts and bolts of the lending process, we can look forward to careful constancy rather than the unhealthy acceleration we saw before the recession.
“Far from the screech of brakes, this is the sound of a well-oiled engine humming in a sustainable gear.”
Higher loan-to-value lending declined 14.9 per cent between September and October, with 9,231 house purchase approvals to borrowers with a deposit of 15 per cent or less of the total value of their property last month, down from 10,844 in September.
Typically first-time buyers, these high LTV borrowers’ share of the market had been stable from June to September. Annually, only 1.7 per cent more higher LTV loans were approved last month than in October 2013, far fewer than September’s annual increase of 34.6 per cent.
However, mortgage approvals on properties worth £125,000 or less remained fairly static, accounting for 19 per cent of the overall market. The average LTV for these homes was 70 per cent in October, down slightly from 71.1 per cent the month before, but higher than 68.7 per cent in October 2013.
Mr Sexton stated that low wage growth and low interest rates have made it difficult for borrowers to save for larger deposits.
“Help-to-Buy had been counteracting this by making it easier to acquire higher-LTV loans. However, the introduction of further regulation in the form of loan-to-income caps in early October has taken some of the wind out of first-time-buyers’ sails.”
He added that while increasingly rigorous testing may have seemed daunting to prospective homeowners, the negative image has likely had a dampening effect on the real positive influence of MMR and Help-to-Buy.
“It is not enough merely to tinker with the financial conditions of first-time buyers and those that lend to them with schemes like MMR or Help-to-Buy; especially if these necessary checks and balances are misconstrued by the very people they are meant assist.”
peter.walker@ft.com
