High LTV new lending drops below 2% in Q1

The proportion of new lending over 90% LTV fell below 2% in Q1 for the first time since the beginning of 2010.

The Financial Services Authority’s mortgage lending data re-leased last week shows new lending over 90% LTV dropped from 2.2% in Q4 2010 to 1.7% in Q1 2011.

But Ray Boulger, senior technical manager at John Charcol, says new lending comprises both remortgage and purchase lending, and bearing in mind that hardly any remortgage business is done at over 90% LTV, a change in the ratio of remortgage to purchase lending would affect the FSA results.

Figures from the Council of Mortgage Lenders show remortgage lending rose 14% by volume in Q1 2011, while house purchase lending fell by 26%.

Boulger says: “Initially it was surprising to see the fall in lending above 90% LTV as the availability of high LTV products has increased over the last year, but when you consider the figure does not include 90% LTV deals it becomes less surprising.

“Also, remortgage activity shot up in Q1 due to fears of a rate rise, so this will have dragged down the average LTV for overall new lending.” The FSA data also reveals that new lending at LTVs of more than 75% but less than or at 90% fell from 27.39% in Q4 2010 to 24.19% in Q1 2011.

But Boulger says this decrease is less dramatic and can be attributed to the fall in purchase lending.

A spokeswoman for the CML says: “The decrease in the proportion of new mortgages at high LTVs in Q1 2011 could be attributed to the rise in remortgaging seen during that period.”