The Council of Mortgage Lenders’ latest raft of mortgage figures provided food for thought last week, showing an encouraging improvement in lending in July.
The total number of loans taken out rose by 5 per cent while perhaps the most encouraging snippet of all was that the average LTV for first-time buyers ticked up in July, creeping above 80 per cent for the first time since 2008.
But with the mortgage market in limbo for so long, it is easy to get carried away when good news does break.
In reality, lenders have not suddenly cast aside their cautious approach to lending to new borrowers.
The improved monthly lending figures were buoyed by the 8 per cent increase in loans to home movers rather than a surge in activity at the lower end of the property ladder.
Even with the average deposit requirement falling to 19 per cent, it is still a tough ask of most buyers, and the number of loans to first-time buyers in July was lower than June, remaining just 53 per cent of the figure seen in July 2006.
With economic conditions still uncertain and the impact of the eurozone crisis weighing heavily on banks and building societies’ balance sheets, lenders are still cherrypicking the wealthiest borrowers with the biggest deposits or most equity and cleanest credit histories.
As a result, it is no surprise that the latest LSL/Acadametrics House Price Index shows that the improvement in the housing market in August is being powered by London and the South, where there are larger concentrations of cash buyers and those with substantial equity, creating an ever more diverse regional picture.
To add a further note of caution, the latest Mortgage Monitor from e.surv indicates that overall lending may have slipped back again last month, forecasting a drop of 8 per cent in total house purchase lending.
Yet we are still to see the effects of the Funding for Lending scheme filter in and the NewBuy scheme is still finding its feet. While it is difficult to foresee lending levels soaring over the medium-term, lenders are being given several helping hands to boost the number of those able to access finance.
It is crucial that banks and building societies use all these tools available to them to help lending to creditworthy first-time buyers to alleviate the growing pressure on the private rented sector and prevent July’s good news being looked back on at the end of the year as a one-off blip.