The latest e.surv monitor showed approvals on all property over £125,000 increased as those buying property over £125,000, typically on higher incomes, were able to secure mortgages.
Approvals rose fastest in London, which saw a 12.3% increase, reinforcing the capital’s increasing disconnect from the rest of the UK market.
Purchase approvals with LTVs over 85% rose in June to 9.4%, up from 8.3% thanks to the wider availability of high LTV products (for comparison, this is still well down on 2008 when approvals with LTVs over 85% accounted for 20.2% of all approvals).
Overall lending conditions remained static, with the average LTV steady at 60.4%, as a consequence of an increase in lower LTV lending to wealthier buyers, which offset the very slight increase in the uptake of high LTV products.
The restrictive criteria on these new high LTV products meant few low-income buyers were able to qualify, and this was reflected in continued subdued activity at the bottom of the market. Fewer first time buyers got onto the ladder in June as approvals for homes under £125,000 – typical first time buyer property - accounted for only 22% of total approvals in June, down from 23% in May, and the lowest level since November 2010.
This contrasts to early 2008 when purchases of the cheapest property accounted for 30% of all approvals. Purchase approvals increased in the higher price brackets, with wealthier buyers more easily able to meet tight lending criteria. Seasonally adjusted approvals fell by 3.6% in June.
Richard Sexton, business development director of e.surv said: “There has been a great deal of recent chatter about 95% LTV products hitting the market, but if you delve beyond the headline loan-to-value ratio it is clear criteria remain too restrictive for the majority of lower income buyers. With average rents now at £696 according to LSL, buying is undoubtedly the cheaper long term option, so there is greater incentive than ever for potential buyers to roll up their sleeves and piece together a deposit if they can.
“Lenders are stuck between the devil and the deep blue sea. On the one hand, they are bound by tighter regulatory standards and a commitment to improve their capital, while on the other they are being put under political pressure to offer more appropriate mortgage products to match the financial situations of consumers. They cannot do both - these contrasting pressures are entirely incompatible bedfellows.
“Lenders still have to deal with significant risks to their balance sheets so, after a concerted effort to meet lending targets for the first half of the year, the next few months could see a return to a lower level of activity as they ration funds cautiously in the third quarter.”
