The amount of lending to borrowers with small deposits has hit its highest level since the financial crisis.
Research from e.surv chartered surveyors shows 10,898 house purchase approvals in June were to borrowers with deposits of 15 per cent or less of the total value of their property. With seasonal adjustment taken into account, that’s the highest level since before the recession hit.
But the numbers are a fraction of the pre-recession peak. In February 2007 there were 41,745 loans to borrowers with a deposit of 15 per cent or under – four times the volume witnessed last month.
Richard Sexton (pictured), director of e.surv, says there has been a “glut” of high LTV deals from lenders over the past year, but they were necessary to help first-time buyers afford homes.
“The base rate has been stuck at 0.5 per cent for five years. Wages have shown sluggish growth. And the cost of getting onto the housing ladder – and saving for a deposit – has been building.”
However Sexton fears there could soon be a reduction in high LTV lending, as the Bank of England is introducing new rules limiting mortgage size in relation to income. This would make it harder for borrowers at the lower end of the market.
He adds: “High LTV lending is the only thread linking many prospective buyers with the hope of owning their own home. Assessing each loan application thoroughly and advising buyers on the consequence of borrowing can only be a good thing. But simplistic loan-to-income caps are a step too far, and may tip hosts of credit-worthy borrowers out of the market.”
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