A tightening of lending criteria caused a drop in purchase approvals for first-time buyers in May, according to e.surv’s latest Mortgage Monitor.
The research shows purchase approvals for homes under £125,000 accounted for 23% of all approvals in May, down from 27% in April, and less than 2010’s average of 24%.
Furthermore, the average LTV for mortgages approved in May fell from 61.0% in April to 60.4% in May, reversing a trend of seven consecutive months of increases.
The average LTV for properties under £125,000 dropped from 67.8% in April to 67.1% in May, while the average LTV for all house price bands up to £376,000 decreased or remained flat.
Meanwhile purchase volumes in the 90% to 100% LTV bracket grew at less than half the pace of the overall market.
Overall purchase approvals increased by 1.1% in May, up from 45,166 in April to 45,675, a rise that e.surv says was driven by higher value homes.
But the number of purchase approvals is still down 7.9% on May 2010’s figure.
Richard Sexton, business development director at e.surv, says that now is a good time for homeowners and buyers to benefit from falling mortgage rates because interest rate rises are seemingly off the agenda for at least another six months.
But he says: “Those with the least equity in their homes need cheaper rates most, so it’s important lenders don’t make it too difficult to qualify for the best mortgages. Tightening criteria in May is going against this grain.
“Some lenders are ahead of the pack and are offering good deals, but for others it’s not enough just to advertise a good headline rate.”