This is according to e.surv, which says the findings suggest the Bank of England’s cautious Credit Conditions Survey is already coming true.
The average loan-to-value (LTV) dropped to 57.2% in September from a two year high of 58.1% in August, the biggest fall in LTVs in a year. This follows a long period of steady improvement - the average LTV expanded in seven of the nine months from December 2009 to August 2010. The peak was 69.4% in October 2006 and the low point was 49.4% in December 2008.
But not all buyers are being treated equally. The squeeze is tightest for those buying lower value property, while those buying more expensive homes have seen far less change in their access to finance.
In September 2006 borrowers wanting to buy a home priced less than £125,000 typically got a 75.9% mortgage. Now they are only offered a 64.3% loan on average, a decline of 11.6 percentage points. This equates to the need to find an additional £11,600 deposit on a £100,000 home.
Meanwhile someone buying a home worth £500,000 can borrow just 3.8% less than four years ago. Their average LTV has only declined from 55.6% in September 2006 to 51.8%. This means they need only find an additional deposit of £18,800 – far less in relative terms than the lower value buyer.
Commenting, Richard Sexton, business development director of e.surv, said: “Tighter loan-to-value criteria have hurt everybody, but those at the bottom of the ladder have been hit disproportionately.
“One in five borrowers wants to buy a home worth less than £125,000. They are the classic first-time buyers, but they are still trailing far behind wealthier home buyers in their access to finance. Those financing homes in the £500,000 price bracket are only around one twentieth of buyers. For them, it’s as if the credit crunch hardly happened. This is a concern as FTB participation is central to any sustained recovery in house prices.”
The latest data from the new e.surv mortgage index shows September mortgage approvals for home purchase recovered 1.8% compared to August to 48,245 (seasonally adjusted), following four months of declines. The Bank of England has just reported August figures of 47,372. Despite the uptick, September was 13.7% below a year ago, a sharper fall than in August.
Remortgage approvals, by contrast, fell 13% in the month to 24,502. This leaves them 4.1% lower than a year ago.
Richard Sexton concluded: “The mortgage market was artificially inflated last year by generous stamp duty incentives. Compared to last year, the rest of 2010 will look rather weak. But the market is not falling off a cliff as the more buoyant September figures show.”
Commenting on the e.surv research, David Brown, commercial director of LSL Property Services, said: “Tightening credit conditions even further will hit both buyers and prospective investors, and threaten to stifle housing market activity.
“Those looking to buy lower value properties have been hit excessively hard by banks’ restrictive lending criteria. The health of the housing market depends upon these buyers - particularly prospective landlords and first-timers. And it’s unlikely we’ll see lending ease in the foreseeable future.
“Despite the mounting pressure to loosen their purse-strings, banks are cautiously looking at their balance sheets, with one eye on the vast sum they must pay back to the government in the next four years. But lenders must tread a fine line – responsibly increasing lending while fulfilling their commitments to the Treasury.
“What is clear is that, unless more mortgage finance is made available to the right borrowers, there is a risk that the property market recovery will splutter to a halt.”
