Mortgage approvals at highest level since 2009

Gareth Fuller/PA Wire

Mortgage approvals surged to 58,610 in January, according to the latest Mortgage Monitor from a firm of chartered surveyors, e.surv. It was the highest level since December 2009.

The figure represents an 11 per cent increase on the 52,939 purchase approvals in December, and a 29 per cent year-on-year increase from January 2011.
The sharp increase has been driven by more lending to borrowers with small deposits, and more first time buyers being given access to high loan-to-value (LTV) mortgages.

The monitor had good news for first time buyers, revealing that that since January 2011 high loan-to-value lending has almost doubled. Loans to borrowers with a deposit of under 15 per cent accounted for only 7 per cent of all loans for house purchase back in January last year, but have risen to account for almost 13 per cent.

In fact, more low income and first time buyers got onto the property ladder as the number of loans to these borrowers increased at a faster pace than loans to wealthier borrowers.

There were 15,329 loans for the purchase of homes costing below £125,000 (a typical first time buyers' property) which was the highest number since March 2008, and a 31 per cent increase from January last year. Good news for first time buyers rushing to beat the end of the stamp duty holiday in March.

Additionally, there was a suggestion that wealthier buyers are beginning to represent a less disproportionately large share of the market. There were fewer loans on expensive property in January than in December, and the number of loans for purchase of expensive property fell in all price brackets over £376,000.

Despite the marked improvement, deposit requirements are still high by historic standards, which mean first-time buyer numbers remain suppressed compared to their pre-2008 levels. In January 2007, the average deposit for house purchase loans was 31 per cent, compared to 38 per cent in January 2012.

Richard Sexton, director of e.surv, said, "Lenders pushed out a spate of high loan-to-value mortgages in the summer to cater for the backlogged first time buyer market, and, although they have taken time to feed through, we now are we beginning to see borrowers take them up in notable numbers."

He warned that the more positive outlook won't last forever though; "Despite all the encouraging news surrounding the market at the moment, danger lurks just around the corner. The rate at which banks lend to each other – LIBOR – has been creeping upwards. The banks are yet to pass these extra costs onto the consumer, but this is sure to happen, and will come in the guise of higher mortgage rates.

"And if the situation in the eurozone becomes more tumultuous, which looks possible, lenders will batten down the hatches and scale back the amount they lend to first time buyers."

Related stories:
Read Full Story Click here to comment