Member Article

Mortgage lending growth focused across North

Mortgage lending has risen nearly 50% on last year, and much of the growth is focussed in the North, suggests new research.

21% of all house purchase loans in the North East & Cumbria were to high loan-to-value (LTV) borrowers in August – the highest proportion of any region.

The regions with the second and third highest proportion of high LTV borrowers were the North West and Yorkshire – 20% and 18% respectively.

Richard Sexton, director of e.surv chartered surveyors, explains: “House prices in the North have risen more slowly over the last five years than in much of the UK, and so that’s driven a boom in high LTV borrowers in the North – for whom house purchase loans are still affordable.

“High LTV lending is the fuel powering the mortgage market recovery. Borrowers with smaller deposits fell out of the bottom of the market when the financial crisis hit, but they are returning now in their droves. Banks are easing lending criteria, and mortgage rates are low. That means repayments are cheaper. Access and affordability – the two keys to the mortgage market – have improved, and unlocked the market for high LTV borrowers.

“But there are already signs that the recovery at the bottom end of the market could slow. Borrowers looking to take out mortgages with smaller deposits are typically first-time buyers. They’re hit the hardest by rising house prices, low savings rates, and high inflation. Weak wage growth, which is consistently tracking below inflation, is another factor. Even though banks are more willing to offer mortgages to borrowers with smaller deposits, it’s harder to put together the deposit in the first place.”

This was posted in Bdaily's Members' News section by Tom Keighley .