Purchase approvals reached a 15-month high in August, due to loosening lending criteria and an increase in high loan to value lending, according to e.surv’s mortgage monitor.
Approvals rose from 49,239 in July to a seasonally adjusted 49,566 in August – the highest since May 2010. Approvals were 4.3% higher than in August 2010 – the biggest year-on-year rise since May last year – reversing the long term trend of negative annual growth.
High LTV lending rose to its highest level this year, contradicting the latest Bank of England Credit Conditions Survey which said lenders would focus more on targeting low LTV borrowers in Q3. Buyers with a deposit of 15% or under accounted for more than 10% of total approvals in August, a high for 2011, but still well short of the 22% seen in August 2008. Purchase approvals with a high LTV grew at almost twice the pace of the rest of the market in August.
Criteria loosened most at the bottom of the market, fuelling a rise in the number of lower income buyers. Approvals increased on all price brackets below £750,000, with the greatest growth seen in typical low income and first time buyer property. Approvals in the price bracket up to £125,000 – typical first timer property – accounted for 24% of all approvals, the highest since April. LTVs rose fastest on the cheapest price brackets as lending conditions loosened most for low income buyers, with the average LTV on the cheapest price bracket rising from 67% in July to 68% in August.
There was a fall in approvals in London, triggered by a decline in approvals on the most expensive property. Approvals held up well on the cheapest price brackets thanks to a marginal increase in high LTV lending. However, high LTV lending was significantly lower in the capital compared to the rest of the country.
Approvals with an LTV of over 85% accounted for just 4% of the total number of approvals in August, less than half the national average of 10%, because wealthier buyers with larger deposits continue to represent a disproportionate share of the market, and because even a small percentage deposit represents a very large sum due to higher house prices in the capital. The average deposit for purchase approvals in London was 41.5% in August, the highest since January, and the highest in the country, reflecting the larger pool of wealthier buyers in the capital.
Richard Sexton, business development director of e.surv said, “The uptick in high LTV lending is encouraging
