Banks reach ‘tipping point’ on high LTV lending - Mortgages - News - Moneyfacts


Banks reach ‘tipping point’ on high LTV lending

Banks reach ‘tipping point’ on high LTV lending

Category: Mortgages

Updated: 11/05/2012
First Published: 11/05/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Mortgage approvals for first time buyers fell to their lowest level in nine months in April, as banks reached a 'tipping point' on high loan-to-value (LTV) lending.

Loans on typical first time buyer properties (worth up to £125,000) fell to just 11,307 in April, 5% lower than in March, and 1.2% down on April last year, according to e.surv.

Banks blamed increasing mortgage funding costs and renewed fears over their exposure to the eurozone crisis for the reduction in lending.

It is the third successive month that lending on residential loans of up to £125,000 has fallen.

Buyers with small deposits were also hit, as banks reduced the availability of high LTV lending.

The number of loans granted to borrowers with a deposit of 15% or under fell to 5,309, well below the three-month average of 6,229.

In the overall market, loans for house purchases fell to 49,165 in April, a fall of 1.4% from March.

Banks lent disproportionately to wealthier buyers, reflecting their reduced appetite for lending to riskier borrowers.

Richard Sexton, business development director of e.surv, said the market has shown fighting spirit and had coped well with the challenging conditions at home and abroad.

"But we've reached a tipping point now," he added.

"Banks and building societies can't afford to sustain their current levels of high loan-to-value lending.

"In addition to their increased funding costs, they are also concerned about their exposure to the debt-riddled European countries, and the increasingly precarious state of borrower finances in the UK ."

Find the best low deposit mortgage for your first home.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Goodbye to the Help to Buy Guarantee

On 31 December, phase two of the Help to Buy initiative will be withdrawn from the market. It’s certainly done wonders for the high loan-to-value sector, so we thought we’d take a closer look at the significance of the scheme and the effect it’s had.

Remortgaging bounces back

Remortgaging has been enjoying a welcome boost in recent months, despite September’s slight dip, with many homeowners capitalising on record low mortgage rates to boost their finances.

Bank of Mum and Dad holds the (house) key

The Bank of Mum and Dad is an important source of finance for many young adults, and it seems that they still hold the key – in more ways than one.