November saw the first loosening of credit conditions in the mortgage market since before the general election with more mortgages being approved for borrowers and on more generous loan-to-value ratios, according to e.surv Chartered Surveyors, the UK’s largest surveyor.
The number of mortgage valuations conducted grew 3.5% in the month, pushing the volume of mortgage approvals in November to 48,846 on a seasonally adjusted basis, compared to 47,185 in October. This was the highest level since May, and the first month-on-month increase since April. Nevertheless the number of mortgages to buy homes was still over a sixth (17.5%) below November 2009.
The average loan-to-value ratio soared by almost one percentage point. It reached 57.7% in November, the first increase since June, and is well up on the meagre 53.0% from November 2009. The nadir was reached in December 2008 at the low point of the post-Lehmans shock. Then, lenders only advanced less than half (49.4%) of a home’s value on average.
Higher value properties broadly saw the best of the loosening in lending constraints. Although loan-to-value ratios expanded in all segments of the market, borrowers buying more expensive homes generally saw loan-to-values rise further than those buying average priced homes (in the £126-250k category), although wealthy borrowers required much smaller LTVs overall. (See table).
Only borrowers of the very cheapest and most expensive homes bucked the trend, but these represent smaller volumes of loans than the average home value.
Richard Sexton, business development director of e.surv said:
“November was a rare bright spot for the mortgage market. There were some very attractive products available and that stimulated a lot of demand from borrowers, both to buy homes and to remortgage.
"Lenders are still more comfortable focusing on wealthier borrowers and are prepared to expand loan-to-value ratios more for these groups than the average, but there was also an unusually large improvement in credit conditions for the lowest value borrowers too.
“Such a strong month will be hard to beat from here, but tales of the renewed demise of the market are hard to reconcile with this sort of strength. The market usually goes very quiet in December of course, so the next big test for the market will be in the new year. January is the month to watch.”
Nicholas Leeming, Commercial Director of Zoopla.co.uk, commented:
“People lined up to buy homes in November as lenders slackened their grip on mortgage credit after a miserly year. There is a lot of demand to buy – from first-timers, to home-movers, to landlords keen to exploit soaring rents. The worry is that lenders slip back to their over-cautious attitude next year, blocking the road to recovery.”
David Brown, commercial director of LSL Property Services comments:
“There is a lot of pent up demand to move home. The strength of November’s figures shows how much the availability of mortgages is controlling the housing market. When lenders make more money available, borrowers snap up the mortgages on offer and the market gets a lift.
"We’re not out of the woods, as lenders on the whole are still not lending enough largely due to a mix of caution about prices and the need to repay their £300bn loan from the government. If they loosened their criteria on lending even just a little it could make a big difference to borrowers and result in some more house sales.”
