Bank of England 

High value mortgages at highest level in two years

High value mortgages at highest level in two years

The proportion of mortgages sold with a high loan to value is increasing, according to the latest Bank of England data.

In its mortgage lenders and administrators statistics, out today (June 11), the Bank reported that the share of mortgage loans with LTV ratios exceeding 90 per cent increased to 4.5 per cent in the first three months of 2019 — up from 3.3 per cent a year earlier and the highest level in two years.

The proportion of high loan to income lending — marked as loans greater than four times the annual income for a single buyer or three times for joint buyers — had also increased from 44.2 per cent to 45 per cent year-on-year.

Last month (May 24), BoE governor Sam Woods said the Bank would be "watching lenders like a hawk" over the ever-increasing amounts of high LTV and LTI mortgages being sold while Moneyfacts data showed an increased level of competition in the high loan-to-value market had led to rate slashing on such higher risk products.

Keith Haggart, managing director of lifetime mortgage provider Responsible Lending, said the growth in lending to buyers with less than a 10 per cent deposit pointed to continuing financial pressure on first-time buyers.

He said: "[First-time buyers’] opportunistic streak means they are likely taking advantage of high LTV mortgages becoming more widely available.

"There is also a developing trend which means buyers are borrowing over longer periods, and this can drive up the LTV, helping them to keep more cash in their pocket."

But Mark Pilling, Spicerhaart Corporate Sales managing director, said increasing LTV and LTI usage could suggest "borrowers are stretching themselves too thin" and that "when rates do rise, they may start to struggle".

The figures from the BoE also showed that consumers borrowed more money to purchase homes in the first three months of 2019 than in the same period last year.

The Bank reported a gross advances total of £63.3bn in Q1 — 1.4 per cent higher than a year ago.

This figure is down on the three previous quarters, however, falling from £72.9bn measured for the last three months of last year, £73.5bn in Q3 2018 and £66.7bn in Q2.

The value of new mortgage commitments — lending which is agreed and will be advanced in the coming months — was 4.5 per cent higher than a year earlier and totalled £63.8bn for the three months to March.

However this was also lower when compared to the rest of 2018.

The outstanding value of all residential mortgage loans increased to £1,451bn, 3.4 per cent higher than a year earlier, following an upward trajectory over the past year and a half.

The interest rates on these mortgages was steady, as the share of loans sold with interest rates less than 2 per cent above the base rate was 83.4 per cent.

This was the first time this share had not risen since 2016, according to the Bank.

Buy-to-let lending claimed a reduced share of the market in Q1 2019 when compared with the year before, dropping slightly to 14 per cent.