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H2B fails to hike 5 per cent LTVs

There has been no change in the proportion of gross lending to borrowers with a 5 per cent deposit over the past three quarters despite the Help to Buy scheme launching in April.

Since the beginning of 2007, about 300 regulated mortgage lenders and administrators have been required to submit a Mortgage Lenders & Administrators Return each quarter, providing data on their mortgage lending activities and covering both regulated and non-regulated residential lending to individuals.

The FCA published its 2013 third-quarter figures last week, showing lending for first-time buyers has risen from 18 per cent this time last year to 20 per cent of all loans in the third quarter.

Only 0.46 per cent of gross advances were for 95 per cent LTV mortgages – the same proportion seen in the second and first quarters of this year.

The share of loans at 90 per cent LTV actually inched lower, from 2.5 per cent in the second quarter to 2.2 per cent in the third.

Income multiples, however, are starting to increase. The percentage of loans at 4x or above on a single income has risen from 10.2 per cent to 10.5 per cent in the third quarter. On a joint basis loans at 3x income or more have risen from 24.8 per cent in the second quarter to 27.2 per cent in the third quarter.

But the percentage of loans at both a high LTV (above 90 per cent) and a high income multiple has dropped from 1.6 per cent of loans in the second quarter to 1.3 per cent in the third.

Chancellor George Osborne last week said Help to Buy is boosting competition on high LTV mortgages as he defended the scheme against accusations it was fuelling a boom. Speaking to the Treasury select committee, Osborne said Help to Buy has boosted 95 per cent LTV deals across the board, not just via lenders who are on the scheme.

Capital Economic chief property economist Ed Stansfield says: “Six months after the launch of Help to Buy, detailed mortgage lending statistics show little evidence of a rise in the share of new mortgages being advanced on the basis of a 5 per cent deposit.

“That suggests that lenders and borrowers remain relatively cautious. However, the small but distinct rise in the share of high income multiple mortgages may suggest that such caution is beginning to fade.”

Coreco managing director Andrew Montlake says the industry will have to wait until the first quarter of 2014 to see the effects of scheme.

He says: “A lot of the high-LTV products have only come out recently so they need time before they filter through the system. As more people apply and find properties, we shall see more of the effects. I would imagine we’ll see some change in the fourth quarter but I think really we will not see as much of a difference until the first quarter next year.”

He says: “A lot of the high-LTV products have only come out recently so they need time before they filter through the system. As more people apply and find properties, we’ll see more of the effects.

“I would imagine we’ll see some change in the fourth quarter but I think really we won’t see as much of a difference until the first quarter next year.” 

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