There were 71,920 house purchase approvals in November, a 6% increase on October, in a sign of growing lender and consumer confidence. Lending to home-buyers was 34% higher than a year ago, when the number of loans approvals came in at just 53,539.
In November, more than an eighth (13%) of all house purchase approvals were to high LTV borrowers, as lenders increased support to borrowers with deposits worth 15% or less of the total value of their property. There were 9,493 high LTV loans in November, 3% higher than in October, and almost double the number of high LTV loans than in November last year (4,872). It was the highest number of LTV loans advanced in a single month since April 2008.
The increase in approvals follows the release of new data from the Bank of England showing that net lending through the Funding for Lending Scheme tripled in the third quarter of this year. Net lending by banks using the scheme climbed to £5.8 billion between July and September, compared to just £1.6 billion between April and June.
Richard Sexton, director of e.surv chartered surveyors, explains:
“The mortgage market is making definite strides back to its pre-crisis health. Between the tail-end of the summer and this autumn, lenders tapped the Funding for Lending Scheme for almost £6 billion worth of funds, and that honeypot is now filtering through to homeowners, in the form of more loans and cheaper rates. Despite the changes to FLS, the mortgage market will continue to thrive. Funding for Lending spurred a limping market into action at the beginning this year, but since then Help to Buy has taken the lead in driving the market forwards.
“November is defying expectations with a continued acceleration in house purchase lending. It comes amid good news of growing GDP and falling unemployment. Positivity is sweeping through the economy and encouraging more prospective homebuyers to the market. And lenders are extending more loans using FLS as a safety valve to release the pressure of lending to riskier high LTV borrowers.”
Total lending improved in every region of the UK aside from Northern Ireland and the South West & South Wales in November, with the South showing a strong monthly pick-up in lending. The number of loans advanced to homebuyers in London rose 9% on October. And in neighbouring region the South East, approvals rose 8% on October.
High LTV loans are becoming more available across the country. In London, high LTV lending picked up sharply, rising 30% in a month to 827 high LTV loans. This trend was echoed in the South West & South Wales, where high LTV loans increased by 9% compared to October.
Richard Sexton, director of e.surv chartered surveyors, explains:
“Help to Buy is taking up the mantle as Funding for Lending is phased out. It is an essential component in the nationwide recovery in lending. In London and the South East, house prices are rising rapidly, and many borrowers struggle putting together a reasonable sized deposit. Here, Help to Buy helps them access lower rates, with less of a deposit. In the North, there are fewer equity rich buyers, and more people are in need of a hand to get on the first rung of the housing ladder.
“But as lending to borrowers with smaller deposits increases, so does the risk of them defaulting on their mortgages, as rates rise. And with unemployment falling, a base rate rise could happen sooner than expected. A base rate rise of up to 1% at the tail-end of 2014 could be very realistic if the economy keeps recovering. To combat this, lenders will inevitably increase stress testing, to ensure that loans are only issued to borrowers that can really afford them. Credit should be more accessible, but lending must be increased in a responsible manner to avoid revisiting the mistakes of the past.”
