Mortgage Approvals Fall As Demand From

Residential PropertyBuyers Fades

UK Mortgage Approvals Fall

UK Mortgage Approvals Fall

UK mortgage approvals in February 2013 have fallen to the lowest level seen for seven months according to E.surv chartered surveyors.

E.surv, reckon that only the government Funding for Lending (FLS) scheme is preventing a much steeper fall in residential property mortgage lending for purchasing, even though uptake from potential property buyers has been lower than expected.

Overall UK mortgage approvals fell by 11% in February to just 49,019,  down from 54,719 approvals recorded in January 2013, making it the lowest mortgage approval level since July 2012, according to E.surv data.

The fall in mortgage approvals comes despite a wider and cheaper range of residential mortgage products on offer, which suggests that the drop in mortgage lending was due to weakening borrower demand and not a decline in the availability of residential mortgages.

It is the second successive month that residential mortgage approvals has fallen, reversing five months of rises in mortgage lending between August and December 2012.

However, e.surv chartered surveyors say that mortgage lending for high Loan To Value (LTV) borrowers increased as a proportion of overall lending, suggesting that mortgage availability for first-time buyers is improving.

  • Mortgage lending to borrowers with a deposit of 15% or less increased to 12.3%, the highest proportion since January 2012.
  • The average LTV also rose to its highest level since January 2012, at 61.3%, after consistently tracking below 60% for most of 2012.

This suggests the fall in residential property mortgage lending in February 2013 was caused mainly by fewer loans being made to low LTV borrowers.

E.Surv’s Business Development Director, Richard Sexton, explains: “House purchase lending has fallen despite a wider and cheaper range of mortgages on offer from lenders. The root cause is difficult to discern: the bad weather at the beginning of the year and a fall in demand for mortgages, rather than a tighter supply of them, may both be factors. More would-be buyers are focusing on consolidating and paying off debts, and are reluctant to purchase a new home while their finances are being pillaged by high inflation and record low savings rates. Despite poorer than expected uptake of Funding for Lending, the scheme has prevented much steeper falls in lending. Critics have been quick to jump on Funding for Lending and paint it as impotent. Net mortgage lending has fallen £1.5 Billion (GBP) since the scheme began, but without it the fall in lending would have been much steeper. The scheme is working, but it is not large enough to cancel out the negative impact of tight credit conditions and a weak economy. It needs to be enlarged.”

Net UK mortgage lending contracts by £1.5 Billion (GBP) since the introduction of FLS

Net UK mortgage lending contracts by £1.5 Billion (GBP) since the introduction of FLS

The Bank of England’s (BoE) latest figures show that overall net lending has contracted by £1.5 Billion (GBP) since the introduction of FLS, but banks have drawn down £13.8 Billion (GBP) from the scheme, suggesting they are using it to cushion the market against an even sharper fall in lending.

The full effects of the government’s Funding For Lending Scheme (FLS) are expected to be revealed over the next few months as, so far, the initiative has been responsible for the improved the cost and availability of mortgages. Since it began last August, over 300 new first-time buyer mortgages have entered the market and rates on fixed rate mortgages have fallen to record lows.

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