E.surv: Lending to lower-deposit borrowers “back on track”

Borrowers with smaller deposits, of up to 15 per cent, have received the better part of the loans advanced in February, according to the the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor.

Approvals for house purchase loans with higher loan-to-value (LTV) accounted for 16.9 per cent of overall approvals in February. This was a significant proportional increase from 15.3 per cent in January and just 13.9 per cent in December, e.surv said.

This has had a positive impact on the absolute number of higher LTV approvals. There were 10,298 higher LTV loans in February, an increase of 10.7 per cent on January.

February was also the third consecutive month of growth in higher LTV approvals.

Richard Sexton, director of e.surv chartered surveyors, commented:

“Lending to lower-deposit borrowers is back on track, which is encouraging as the mortgage market moves into spring. Higher LTV borrowers took a nosedive in October as a proportion of the market,  after the introduction of loan-to-income caps became a challenge for first-time buyers. But these buyers are evidently returning to the market to take advantage of low mortgage rates and cheaper stamp duty charges. And after the tricky bedding in phase that accompanied new mortgage legislation, first-time buyers are now once again accessing a market restructured for long-term viability.

“Even with this revival, we’re safely below the high-tide mark of higher LTV lending seen back in 2007 – when smaller deposit borrowers made up around a third of total lending. The Mortgage Market Review has ensured that all future borrowers are subject to comprehensive affordability checks and given plenty of advice, and so the danger of them defaulting has been reduced. Many prospective borrowers are unable to save up a massive sum for a deposit – but they often still have strong monthly incomes and make attractive customers for lenders. Low deposits do not necessarily need to mean high risk.”

Lending to borrowers with lower deposits grew in all regions except for the South East and Yorkshire.

The highest proportion of borrowers with higher LTV loans to get a house purchase approval in February was in the North West (27 per cent).

“People with higher LTV loans are typically first-time buyers, looking to make the crucial leap onto that first rung of the property ladder.

“We can see the effects of Help to Buy taking strongest root in the North. It’s a vital scheme to ensure people are able to become homeowners for the first time while savers struggle to put a deposit together against a backdrop of low interest rates. It’s clear that these effects aren’t having quite the same impact in the South. The simplest and most effective answer is to build more houses. The shortage of homes is a problem all over the UK but, as the figures show, especially acute in London and the South East,” Sexton said.