Mortgage lending slowdown hailed as sign of healthier market
The Bank of England’s lending statistics revealed gross advances dropped by 0.2 per cent year-on-year in quarter four 2014 to £51.3bn.
However in comparison to Q3 a sharper drop off in lending was recorded as gross advances fell by 8.1 per cent from £55.9bn. Net advances decreased from £9bn in Q4 2013 to £8.1bn in Q4 2014. The statistics revealed a decrease in high loan-to-income lending as the proportion of gross advances to borrowers with a single income multiple of more than four times the mortgage fell by 1.1 percentage points to 9.7 per cent in Q4 2014.
The proportion of gross advances to borrowers with a joint income multiple of more than three times decreased by 2.4 percentage points from Q3 2014 to 26.2 per cent. House purchases accounted for 71 per cent of lending in Q4; at £36.4bn this was 0.8 percentage points lower than the previous quarter but 3.7 per cent higher than quarter four 2013.
The proportion of lending to first-time buyers increased by 0.1 percentage points to 21.8 per cent in Q4 last year but the value of residential loans for first-time buyers decreased over the quarter to £11.2bn.The proportion of buy to let lending increased from 14.3 per cent in Q3 2014 to 14.9 per cent in Q4 2014. In value terms over the past year lending rose from £6.6bn advanced in Q4 2013 to £7.6bn in Q4 2014.
The proportion of remortgages increased to 23.7 per cent in Q4 2014 from the lowest recorded point of 23% in Q3 2014 while other new lending, which includes lifetime and equity release mortgages, fell from 3 per cent in Q3 2014 to 2.9% in Q4 2014.
Adrian Gill, director of Your Move and Reeds Rains estate agents, said: “The lending landscape has been extensively re-shaped in the past year and fresh regulations and affordability checks have cultivated a much healthier mortgage market. Mortgage approvals may take longer to come to fruition but buyers are benefiting from a more thorough and considered borrowing process. In the longer term, providing customers with the most suitable mortgage product for their needs is of paramount importance.”
In the prolonged low-interest rate environment borrowers are increasingly willing to take on variable rates. The percentage of gross advances at fixed rates decreased for the first time in nine quarters from 82.6% in Q3 2014 to 82.2 per cent in Q4 2014.
High loan-to-value (LTV) lending took a slight tumble as the proportion of gross advances at LTVs of over 90 per cent decreased by 0.5 percentage points over the quarter to 3.8 per cent in Q4 2014. Head of lending at Mortgage Advice Bureau Brian Murphy said: “Mortgage affordability is certainly swinging in consumers’ favour. However, for those with small deposits, there is definite room for improvement.
“While the Help to Buy scheme has helped to prop up higher LTV lending, it continues to be underrepresented in the market. More lenders need to expand this area of lending to ensure the housing ladder is not out of reach for lower income first-time buyers.”