Proportion of mortgages at 90% LTV or greater hits six-year high

The proportion of lending at 90 per cent LTV or higher has hit a six-year high on the back of the Government’s Help to Buy initiative, new data published by the FCA and the Bank of England reveals.

The proportion of mortgage advances at 90 per cent LTV or higher reached 4.6 per cent in the second quarter of 2014, up from 2.5 per cent a year earlier.

A total of £51.5bn was advanced in mortgage loans during Q2, a 23.5 per cent increase from 12 months previously.

House purchase loans totalled £36.1bn during the three-month period, up from £27.1bn in Q2 2013.

First-time buyers accounted for £11.4bn of new lending during the quarter, compared with £8bn in FTB loans during the same period in 2013. First-time buyers represented 22.1 per cent of of mortgage borrowers in Q2 this year, representing an annual increase of 3 per cent.

Loans for home movers accounted for £17.7bn, representing a rise of £3.6bn from last year’s figure of £14.1bn.

Some £7bn was advanced to buy-to-let borrowers, up from £5bn in Q2 2013.

Genworth vice president for mortgage insurance Europe Simon Crone says: “The jump in high LTV lending shows the Help to Buy mortgage guarantee is doing the job it was designed for by reviving this part of the market. Even so, it is wishful thinking to expect that the outlook for first-time buyers will be permanently improved by a temporary fix in a market whose mechanics have fundamentally changed since the recession.

“First-time buyer lending still amounts to just 22 per cent of activity when it once averaged 40 per cent, so it is no surprise that owner-occupation has suffered as a result.”