LTVs hit a six-month low
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Purchase approvals with an LTV over 85% were the lowest since February, accounting for only 8.5% of all approvals in July, down from 9.4% in June, shows the latest e.surv Mortgage Monitor.
By way of comparison, in August 2008 this figure was 22.2%, overall, the average LTV fell to 60.3%, again the lowest since February.
Purchase approvals also dropped 2.5% in July, down from 48,421 in June to a seasonally adjusted 47,228.
Approvals fell on all price brackets below £750,000, with lower income buyers in particular struggling to secure mortgage finance against a backdrop of tighter lending conditions.
Lower income buyers were the hardest hit. Despite more high LTV products entering the market, lending criteria tightened most at the lowest end of the property ladder. Approvals on homes below £250,000 fell to their lowest level this year, shows the survey.
Approvals on typical first-timer property, under £125,000, accounted for just 23% of all approvals in July, well below the highs of 30% seen in August 2008.
LTVs fell fastest in the cheapest price brackets. LTVs on typical first timer property were at the lowest for six months, meaning low income buyers required larger deposits to qualify for mortgage finance. Before the economic downturn in 2008, the average LTV for first-timer property was 76%.
Richard Sexton, business development director of e.surv says: “Weak growth has handcuffed banks and given them almost no margin to increase mortgage lending. Given the economic backdrop, the uptick in lending seen in June seems to have been a flash in the pan. We expect lenders will now focus on consolidating balance sheets and recouping equity in the third quarter. They only upped the ante of their lending in a bid to meet mid-year targets, so the next few months should see a return to a more subdued trend.
“For those who can access mortgage finance, the good news is that fixed rate deals seem certain to remain particularly cheap, meaning now is a good time to lock in low repayments. The UK resembles an island of calm amid the international economic turmoil, which great news for borrowers as it means repayment rates will remain low for the foreseeable future.”
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