High LTV lending increases

In the second quarter of the year 4.6% of loans issued for purchase or remortgage were over 90% LTV, up from 3.6% in the first quarter of 2014 and 2.1% in the final quarter of 2013.

Home purchase lending to first-time buyers accounted for 22.1% of loan advances in Q2, up from 20.1% in Q1, while loan values increased from £9.4bn to £11.4bn from Q1 to Q2.

Simon Crone, vice president of mortgage insurance Europe for Genworth, said: “The jump in high loan to value lending shows the Help to Buy mortgage guarantee is doing the job it was designed for by reviving this part of the market.

“Even so, it is wishful thinking to expect that the outlook for first-time buyers will be permanently improved by a temporary fix in a market whose mechanics have fundamentally changed since the recession.

“First-time buyer lending still amounts to just 22% of activity when it once averaged 40%, so it is no surprise that owner-occupation has suffered as a result.”

Lending over 90% LTV and above 3.5x loan to income for single income borrowers stood at 3.4% in Q2, 0.8% higher than Q1 2014.

David Newnes, director of Reeds Rains and Your Move estate agents, warned against LTI caps, which could curb such lending.

He said: “The government should be mindful that additional loan to income caps and further untimely interventions don’t cast a shadow over consumer confidence and activity.

“Extra support is strengthening the teetering recovery in pockets of the UK where growth is now stalling or never really got into its stride in the first place.

“In areas like these, sustained demand at the bottom rung of the ladder is paramount to ensure that the recovery radiates out nationwide.”

The proportion of Q2 house purchase lending was 70.1%, 3.7% higher than Q1 2014.

Gross advances for house purchase increased by £4.8bn to stand at £36.1bn in Q2 2014, up from £31.3bn in Q1.

Paul Hunt, managing director at Phoebus Software, said: “Despite increasing amounts of regulation the mortgage market is definitely undergoing a bounce back.

“The value of loans has increased every quarter for the last four and the number of gross advances has the highest amount advanced in the second quarter of a year since Q2 2008.

“The mortgage market is incredibly resilient. Despite ongoing regulatory changes the appetite for loans is continuing to increase and lenders’ ability to cope with this demand is holding up well.

“While we have interest rate rises, the European Mortgage Directive and a general election around the corner, I expect that these numbers will continue to rise.

“Lenders’ appetite for risk has increased despite the MMR as evidenced by the increasing amount of loans at above 90% LTV and the increase at high income multiples, but this appears to be justified by falling arrears figures both for new and existing arrears.”