Mortgages  

Higher LTV lending a quarter of what it was in 2007

Higher LTV lending a quarter of what it was in 2007

Loans to borrowers with small deposits saw a year-on-year increase in April, according to E.surv, with 10,112 house purchase loan approvals for typically first-time buyers with deposits worth 15 per cent or less of their property’s total value.

This was 7.3 per cent more than in April last year and 6.4 per cent more than the 9,508 borrowers seen in March.

However, the number of house purchase approvals fell year-on-year, suggesting higher loan-to-value lending is helping to support total mortgage approval figures, according to the surveyor’s monthly update.

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In the total market, there were 1.9 per cent less approvals for house purchase loans in April than there were last year - 62,035 loans, down from 63,236.

As a proportion of total approvals, higher LTV lending now stands at 16.3 per cent, compared with 15.5 per cent in March and 14.9 per cent last April.

Richard Sexton, director at the chartered surveyor firm, explained borrowers with smaller deposits are making a comeback thanks to increased accessibility in lending, improving wages and 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, he cautioned that it is 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.”

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

At the other end of the spectrum, house purchase approvals for this bracket surged ahead in the north west, rising to 24 per cent as a proportion of approvals in April, up from 21 per cent in March.

Mr Sexton commented that with the Scottish National Party winning a landslide, Westminster 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.

“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.”

peter.walker@ft.com