Sad as the end of the summer is, its arrival is often welcomed by estate agents and mortgage brokers alike as it represents a return to (hopefully) increased business levels after the traditional downtime of July and August. However, the start of this year’s school term hasn’t provided the usual impetus and has actually gone down on record as the third worst September in the last 20 or so years, according to e.surv. At a time when transactions traditionally perform well, house purchase loans in September 2012 fell by 7% year-on-year to just 47,603.
Perhaps most worrying of all is the lack of new borrowers entering the market. With the average loan-to-value amount falling to an 18-month low of 59%, it is evident how few first-time buyers are able to take the initial step on to the property ladder as they often require much larger loans. In fact, only one in 10 of all house purchase loans went to borrowers with an LTV of 85% or over, proving just how reliant the market has become on remortgage business. The number of loans to these borrowers with a deposit of 15% or less has remained below 5,000 for three consecutive months now, the first time this has happened in over a year
I would suggest it is still too early to make a definitive appraisal on the Funding for Lending scheme, but it certainly doesn’t seem to have had the desired effect on its intended target – first-time buyers. Perhaps the most frustrating statistic of all is that there are almost a fifth more 85%-plus LTV products available than 18 months ago, yet new borrowers are unable to take advantage of this increased choice due to the restrictive caveats that are attached to such deals. Banks are entitled to set their criteria as they see fit, but by effectively excluding so many first-time buyers they are paying mere lip service to one of their most important demographics.
The full extent of the malaise is highlighted by the fact that house purchase loans are not only down 7% year-on-year, but they are also 10% below September 2009 when the market was still in the eye of the storm. It is very much a case of smoke and mirrors from where I’m sitting – lenders appear to be open for business and product availability appears to be relatively healthy, but the monthly statistics seem to suggest otherwise.
Conveyancers play such a vital part in the home-buying process, but it is frustrating that we have no real way of helping spark the market into life and are so dependent on mortgage lenders making the decisive moves. It may well be the case that the Funding for Lending scheme eventually cajoles the market back into action, but until one or two lenders stick their head above the parapet in terms of keener rates or more sensible underwriting, then things look likely to remain locked at stalemate. A little common sense (in terms of how applications are viewed) really could go a long way.
Harpal Singh is managing director of Broker Conveyancing