The mortgage market is definitely booming, with more people getting onto the ladder as confidence soars. It seems that a lot of this activity is down to those at the start of their property journey who perhaps don't have such a big deposit, with an increasing number of buyers turning to high loan-to-value (LTV) mortgages.
Research from Mortgage Advice Bureau (MAB) has revealed that more than one in four borrowers (27%) sought mortgages above 90% loan-to-value (LTV) in the 12 months to March 2014, up 8% on the previous year when just 19% were looking for a mortgage of this kind.
Interestingly, this figure peaked in the final few months of 2013 when 29% of consumers were looking for high-LTV deals, arguably thanks to the launch of the mortgage guarantee element of Help to Buy. This boosted availability of 95% LTV mortgages meaning people could buy a home with a deposit of just 5%, and given that these mortgages are typically the preserve of first-time buyers, the figures would suggest that an increasing number are able to get on the ladder.
However, fears that Help to Buy could be fuelling house prices haven't been backed up by the report, with the average property price among mortgage seekers actually falling – in the first three months of the year the average property stood at £215,782, a 7% drop from the £232,729 figure recorded in the same period of 2013. The average loan amount is down too, this time posting a drop of 11%, going from £157,349 to £140,723 over the same period.
"This evidence suggests that the bulk of mortgage seekers are focused on hunting down loans on moderate sized properties. Lower earners are plucking up the courage to explore their options, and a lot of borrowing interest is coming from consumers with modest ambitions of buying a home," said Brian Murphy of MAB, with the figures providing further indication that it's buyers lower down the property ladder who are fuelling the level of activity in the market.
This increased activity is verified by statistics from HMRC, with property sales in March being 19% higher than they were in the same month last year. The monthly total stood at 94,080, signalling a steady rise over the year and adding to the quarterly total to make it the busiest first three months of the year since 2008 – usually this time of year is a slow period for the market, but there's been a definite upsurge.
Again, the Government's Help to Buy scheme could well have played a part, while an improving economy overall means people are more confident in getting on – or moving up – the ladder. Rising house prices will be beneficial for current homeowners too, giving them more equity with which to buy their next home.
However, these sales figures are still significantly below those seen during the housing boom, so fears of a return to previous levels should hopefully be allayed somewhat. The new mortgage affordability rules could potentially have an impact on sales figures too – as of Saturday a mortgage could become harder to secure and the application process will take far longer, which could reduce demand among buyers.
The trend of potential buyers seeking high-LTV mortgages doesn't seem to be showing any sign of slowing down, however, particularly as prices continue to rise. Borrowers with smaller deposits have access to an increased number of options, and hopefully the new rules won't have too much of a detrimental impact: "it is important to get the message across that the mortgage market is very much open for business to buyers who can manage their repayments," said Brian Murphy, with the new regulations simply being a way to help support responsible lending – something which is beneficial for everyone concerned.
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