Mortgage approvals drop to five year low in May
There were 57,813 house purchase mortgage approvals in May, 15.1% fewer than the 68,076 recorded in April.
This makes May the quietest month for house purchase lending in over two years, with the lowest monthly volume of house purchase approvals since April 2013 (55,573).
April saw a 9.9% monthly increase as high-end buyers pushed through sales in an attempt to circumvent the threat of a potential Mansion Tax.
On an annual basis, approvals were 6.4% below the 61,737 seen in May last year.
Richard Sexton, director of e.surv, said: “The election appears to have created a short-term pause in the purchase market, but the wider pattern remains one of steady, sustainable growth.
“The threat of Mansion Tax caused concern for some at the start of the year, producing an artificially strong result for April as high-end buyers pushed through purchases ahead of the election.
“The opposite was true for those just reaching the start of the homebuying process in April, who held off on their home search to wait for the outcome of the election. It takes time to ratify a mortgage – the rebuilt, post-MMR mortgage market requires stringent checks and balances before things can progress – meaning there’s a lag in the time it takes for these effects to register. May saw the delayed effect of this election uncertainty.
“Nevertheless, lenders are signalling an increased willingness to help homebuyers move on and up the housing ladder, which bodes well for the coming summer.”
Smaller-deposit borrowing stays strong in May
The number of higher-LTV house purchase approvals (to borrowers with a deposit worth 15% or less of their property’s total value – typically first time buyers) has fallen in line with total house purchase approvals, but remains stable as a proportion of the market.
There were 9,366 higher LTV loans in May, down 15.6% compared to the 11,096 seen in April, and 4.0% lower than the 9,754 loans recorded in May last year.
However, as a proportion of the market, the number of higher LTV loans stood at 16.2% in May, falling by just 0.1 percentage point since April (16.3%) and 0.4 percentage points above the 15.8% proportion they occupied in May 2014.
Sexton added: “This is a reassuring result for smaller-deposit borrowers. The downturn in total approvals was the result of election uncertainty but low-deposit lending held fairly steady.
“The higher-LTV lending increase has been vital for keeping first-time buyers in the market, but it hasn’t been an easy process. First-time buyer numbers had dropped off a cliff after the downturn. With inflation in the negative and wages starting to grow, the first-timer market should become more benign. The raft of government support available, including the recently introduced help-to-buy ISA, has also bolstered numbers.”