With the election closing in, there were just 60,280 loans for house purchase made this March, a 2.4% dip from the 61,760 seen in February.
This figure also represents a 10.0% drop compared to March 2014, when there were 66,970 such loans. This is, however, the smallest annual fall seen for half a year.
On a quarterly basis, there were 182,747 house purchase approvals in Q1 2015, compared to 178,579 in Q4 2014.
Richard Sexton, director of e.surv chartered surveyors, explains:
“The supply of accessible mortgages remains strong, but demand has wavered in the face of an uncertain General Election. This is an unwelcome though not unexpected setback. You can lead a horse to water, but you can’t make it drink.
“The fact we’ve only experienced a minor jitter in the face of great uncertainty is testament to the resilience of the renewed mortgage market. The trend is still towards growth: there were 2.3% more house purchase approvals in Q1 2015 than Q4 2014. We have to expect to come up against outside influences on homebuyers from time to time.”
Borrowers with deposits worth 15% or less of their property’s total value have fallen back in March, a downturn from the resurgent trajectory seen in the preceding four months.
In March, there were just 9,343 house purchase approvals made for borrowers in this bracket, down 10.5% from February’s 10,437, but only 5.1% below the 9,845 approvals seen in March last year. Smaller-deposit borrowers have also dropped back as a proportion of all house purchase approvals, representing just 15.5% of borrowers in March, compared to 16.9% in February.
The most recent Credit Conditions Survey from the Bank of England stated that the supply of loans for house purchase increased in the first quarter of the year, but demand decreased in the same period.
The proportion of higher LTV lending has fallen in most UK regions compared to February. Northern Ireland has been hit the hardest, with the proportion of higher LTV loans in the region falling from 27% to just 22% of total house purchase lending. Higher LTV lending also took a hit in the Northwest, falling from 24% to 21% as a proportion of house purchase lending in the area.
Richard Sexton comments:
“Smaller deposit borrowers, typically first-time buyers, are among the most cautious borrowers. Picture yourself buying a home for the first time – investing a carefully husbanded nest-egg into a property you want to enjoy and likely resell at some point in the future. It’s understandable that they might want to wait for the dust to settle after the election before they make the leap.
“Higher LTV loans are still available to borrowers who want them. The Help to Buy scheme expanded in March to include a new ISA available exclusively to first-time buyers, helping them to build that all-important deposit. With the price war between banks producing attractive fixed rate deals, it’s an excellent time to be a first-time buyer.
“While these pre-election cold feet may prove to be temporary, the underlying problem of the housing shortage still needs to be addressed. Attractive deals and rewarding schemes can only carry the market so far: more homes need to be built for borrowing to flourish.
“Help to Buy is continuing to work in the areas that need it most: the North West and Yorkshire – areas which have been slower to recover from the recession, where buyers typically still have lower incomes.
“The Help to Buy ISA announced in the Budget isn’t going to kick in until the Autumn, but it’s a sign that things are heading in the right direction from a legislative point of view. What still needs to happen is serious support for housebuilding, targeted at the areas struggling the most.”
