Home movers typically borrowed 67% of the value of a property in May, unchanged from April, and 2.68 times their income, up from 2.63 times income in April.
Given that some higher loan-to-value products have come on to the market in recent months, we could see further modest easing in some of these measures over the summer. According to the Bank of England’s recent Credit Conditions Survey, firms also reported that they intend to increase lending.
The number of loans for house purchase edged up 4% in May to 37,400, worth £4.7 billion. But house purchase lending is still depressed by historical standards, and the number of loans is 28% lower than a year ago.
Remortgaging also remains weak. There were 29,000 loans in May, 9% fewer than in April and 63% fewer than a year ago. Demand for remortgaging is falling as many borrowers coming to the end of a fixed-rate period are reverting to attractive standard variable rates. Declining house prices and loan-to-value ratios are also restricting borrowers’ capacity to remortgage.
Lending remains at a very low level overall, with a modest increase in house purchase activity offset by a decline in remortgaging. The trend of tightening lending criteria seems to have subsided, and may ease further over the rest of the summer. But access to mortgage funding continues to be constrained by the diminished number of active lenders and the shortage of funding available to them.
