Strongest mortgage lending since 2007
IT WAS a positive result for 2012, which saw lending for first-time buyers increase by 11 per cent last year, as lending to borrowers with small deposits reached its highest level since the start of the financial crisis.
The latest figures show that nearly 64,000 house purchase loans were granted to buyers with small deposits last year – up from 57,691 in 2011. It marked the best year for high loan-to-value lending since 2007.
Last year was also the strongest for house purchase lending since 2007, with the number of loans breaching the 600,000 mark. Purchase approvals rose three per cent from 590,425 in 2011 to just over 607,000.
In my view, the stabilisation of the Eurozone crisis and access to cheaper mortgage funds for banks were the foundations of the improvement.
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Last year was also a year of two distinct halves for first-time buyers, which saw home purchase loans split equally between the first and second halves of the year, loans to first-time buyers falling away sharply by 13 per cent in the second half of the year.
Meanwhile, banks sustained lending levels in the second half of the year by focusing lending on wealthier borrowers at the expense of first-time buyers.
Although the range of high loan-to-value mortgage products available has improved, banks did continue to keep a close rein on underwriting criteria more generally in the second half of the year, which was despite a record quarterly increase in quarter four to the mortgage credit available to lenders – in part stimulated by the Funding for Lending Scheme.
The Olympics distracted potential home movers and also coincided with a weaker than expected quarter of economic growth. However, quarter four saw an improvement in lending, which was helped in part by the start of the Funding for Lending Scheme.
In line with the poor second half of the year, house purchase lending dipped sharply in December with purchase approvals falling nine per cent to 49,113 from 54,036 in November, and there were seven per cent fewer loans than in December 2011.
On a positive note, the Bank of England has suggested Funding for Lending will have a much greater impact on lending this year, together with a relaxation of bank capital adequacy rules, which will give lenders more time to establish the capital buffers stipulated by regulators.
This should free up more funds for mortgage lending in 2013 and, instead of a full buffer by 2015, banks will only be required to build up 60 per cent of the required amount.
If you are thinking of moving this year, and would like to talk to a mortgage advisor about the different types of mortgages and rates available, then pop in or call your nearest Lovelle Estate Agency office.