House purchase approvals mark highest monthly growth since 2009

House purchase approvals in January increased at the highest rate recorded in the five and a half years, the latest Mortgage Monitor of chartered surveyor e.surv shows.

There were 65,778 approvals last month, 9.1 per cent more than in December 2014. This is the best growth rate reached since April 2009.

Although strong approvals in January 2015 remained 12.9 per cent below the previous year level. This means January is the fifth month in a row, in which approvals have decline on an annual basis.

The two opposite forces influencing borrower sentiment are the record-low interest rates, which entice people to lock in bargain mortgage rates while they last, and the uncertainty surrounding the upcoming General Election, which makes some potential buyers rather hesitant.

“The market’s young shoots of growth will continue to be guided, supported and at times restrained by a rigid structure of legislation. Whilst the Mortgage Market Review and LTI caps are preventing what has previously been perceived as higher risk lending, equally we have Help-to-Buy supporting and encouraging first-time buyers. With the announcement that the Bank’s Monetary Policy Committee is going to be given new abilities to place caps on LTV ratios, it looks like the purchase mortgage market could be closely managed and scrutinised in the run-up to the General Election,” Richard Sexton, director of e.surv chartered surveyors, comments.

There was an increase in the number of loans given to borrowers with higher loan-to-value (LTV). Their proportion of all borrowers in January stood at 15.3 per cent. The number of first-time buyers with higher LTV loans grew by 1,700 month-on-month to 10,064 in January.

“Help to Buy is doing its work, plugging the savings gap left by low interest rates, enabling first-time buyers to get on the property ladder despite only being able to save small deposits. Lenders are locked in a price war, offering ever-lower repayment rates to try and bring in borrowers – confident first-time buyers will take this as a sign that the ball is in their court.

“But first-time buyers can be challenged by the introduction of new regulation. No matter how you slice and dice it, caps add another layer of complexity for people fresh to the house-purchase market,” Sexton says.

Help to Buy is having an effect on a regional level as well, since January saw a rise in North West house purchase lending at higher LTV. The proportion of borrowers with deposits of 15 per cent or less in that region was 24 per cent. The North West was outpaced only by Yorkshire, where 28 per cent of the approved loans were to low-deposit borrowers.

Regional stats for approvals at higher LTV:

House purchase approvals: