Last month saw a 14.9 per cent fall in low-deposit lending, according to the latest Mortgage Monitor from chartered surveyors e.surv.
Low deposit – also known as high loan-to-value (LTV) – lending declined 14.9 per cent between September and October. There were 9,231 house purchase approvals to borrowers with a deposit of 15 per cent or less of the total value of their property in October, down from 10,844 in September.
Those with low deposits are typically first-time buyers. Their share of the market had been fairly stable from June to September, fluctuating between 17.4 and 17.8 per cent. But it dropped off to just 14.9 per cent of all house purchase borrowers last month.
Richard Sexton, director of e.surv, comments: “Slow wage growth and low interest rates have made it difficult for borrowers to save for larger deposits. Help-to-Buy had been counteracting this by making it easier to acquire higher-LTV loans. However, the introduction of further regulation in the form of loan-to-Income caps in early October has taken some of the wind out of first-time-buyers’ sails.
“The increasingly rigorous testing may have seemed daunting to prospective homeowners – a negative image has likely had a dampening effect on the real positive influence of MMR and Help-to-Buy. In addition, those who have seen regulation for the vital tool it is have started to buy up the existing stock of starter homes.
“It is not enough merely to tinker with the financial conditions of first-time buyers and those that lend to them with schemes like MMR or Help-to-Buy – especially if these necessary checks and balances are misconstrued by the very people they are meant assist. In some areas of the country we’re approaching a situation where if more houses aren’t built, more houses can’t be sold.”
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