Looser lending conditions see high LTVs and house purchases rise

Published: 18/01/2012

Loan-to-value (LTV) mortgages of 85 per cent and above increased 32 per cent in 2011, according to e.surv. There are currently 57,301 85 per cent and above LTV mortgages available, up from 43,379 in 2010, making lending conditions at their most accessible since August 2007.

Meanwhile, house purchases enjoyed a year-on-year increase in November for only the second time in 2011, according to the Council of Mortgage Lenders (CML).

47,000 loans (£6.9bn) were advanced in November, an increase of 3 per cent and 5 per cent by number and value respectively when compared to 12 months prior and 4 per cent and 5 per cent on the previous month.

17,300 loans (£2.1bn) were taken out by first time buyers, an increase of 4 per cent by volume and 5 per cent by value year-on-year and month-on-month. Such an increase was always expected as more and more first time buyers rush to take advantage of the Stamp Duty concession before it ends in March.

Paul Smee, Director-General of the CML is encouraged by the figures:

“A rise in mortgage lending towards the end of 2011 is a welcome indictor for the industry considering confidence has been weak due to fragile economies both at home and in the eurozone.”

Richard Sexton, Director of e.surv, agrees:

“The improvement in 2011 is modest, but when taken against the backdrop of the eurozone crisis and turgid economic growth, it’s clear the market has demonstrated real staying power last year.

“Banks have made a concerted effort to increase the amount they lend to first time buyers which is reflected in the big jump in higher loan-to-value lending. They are also supplementing this with more lending to buy-to-let investors.

“It’s important,” he added, “to keep things in perspective. The gains over 2011 shouldn’t be taken as a portent of a return to the sunnier climes of the pre-2008 market.

“2012 will be a difficult year. Banks will pass the increased cost of funding themselves onto the consumer, and will likely focus on hoarding capital rather than new lending. A flat market looks like the best we can hope for.”

Content correct at time of publication