Election jitters have caused the largest drop in mortgage approvals in the last five years, according to the latest Mortgage Monitor from chartered surveyor e.surv.
Only 57,813 house purchase mortgages were approved in May 2015, which was a 15.1 per cent fall from the 68,076 loans approved in April.
This makes May the quietest month for house purchase lending in over two years, with the lowest monthly volume of house purchase approvals since April 2013 (55,573).
Approvals in April were artificially inflated as many people, who were looking to buy high-end properties, rushed to close a deal before a potential mansion tax were imposed. This resulted in a 9.9 per cent monthly increase compared to March.
On an annual basis, approvals were 6.4 per cent below the 61,737 seen in May last year.
Richard Sexton, director of e.surv, comments:
“The election appears to have created a short-term pause in the purchase market, but the wider pattern remains one of steady, sustainable growth.
“May saw the delayed effect of this election uncertainty. Nevertheless, lenders are signalling an increased willingness to help homebuyers move on and up the housing ladder, which bodes well for the coming summer.”
First-time buyers keep head over water but for how long?
Although lending to borrowers with smaller deposits (worth 15 per cent or less of the property value) fell by a monthly 15.6 per cent to 9,366 in May, the overall proportion of approvals for such loans on the market remained relatively stable.
The share of house purchase approvals at higher loan-to-values (LTVs) was 16.2 per cent in May, only 0.1 percentage point lower than in April.
Nevertheless, the process of keeping first-time buyers in the market is getting increasingly harder.
Sexton explains: “This is a reassuring result for smaller-deposit borrowers. The downturn in total approvals was the result of election uncertainty but low-deposit lending held fairly steady.
“The higher-LTV lending increase has been vital for keeping first-time buyers in the market, but it hasn’t been an easy process. First-time buyer numbers had dropped off a cliff after the downturn. With inflation in the negative and wages starting to grow, the first-timer market should become more benign. The raft of government support available, including the recently introduced help-to-buy ISA, has also bolstered numbers.”
London market has been best for small-deposit borrowers
Regional snapshot: Lending to borrowers with smaller deposits strengthening in London
Higher LTV lending has improved or remained stable as a proportion of total home purchase lending in most regions of England and Wales. Though Yorkshire and the North West remain in first and second position respectively, the gap between them is widening, as higher LTV lending builds even further in Yorkshire.
Meanwhile, London saw small-deposit borrowers represent 8% of house purchase lending in May – up from 7% in April, suggesting the beginnings of a slow revival in first-time buyer numbers in the capital.
“Many areas of the country are seeing small deposit borrowers gradually account for more of the mortgage market. In Yorkshire, higher LTV lending now represents more than a quarter of all house purchase approvals.
“The improvement rings true in areas with smaller numbers of low deposit borrowers too. London has seen higher LTV borrowers grow as a proportion of house purchase lending from 7% to 8% – a small but significant step meaning more first-timers in the capital are getting onto the housing ladder,” Sexton says.
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| Region | Proportion of higher LTV loans(May 2015) | Proportion of higher LTV loans(April 2015) |
| Yorkshire | 26% | 25% |
| North West | 23% | 24% |
| Midlands | 20% | 20% |
| Northern Ireland | 20% | 19% |
| UK average | 16% | 16% |
| Eastern | 15% | 17% |
| South/South Wales | 15% | 15% |
| South East | 11% | 12% |
| Scotland | 10% | 12% |
| London | 8% | 7% |
Mortgage approvals December 2014 – May 2015 (seasonally adjusted)
| Month | Number | Monthly change | Annual change |
| December | 60,340 | +2.2% | -16.4% |
| January | 60,991 | +1.1% | -19.5% |
| February | 62,304 | +2.2% | -11.5% |
| March | 61,945 | -0.6% | -8.2% |
| April | 68,076 | +9.9% | +8.0% |
| May | 57,598 | -15.1% | -6.4% |
