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Gross mortgage lending up 4% as lenders target high LTI and LTV borrowers

  • 11/12/2018
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Gross mortgage lending up 4% as lenders target high LTI and LTV borrowers
Mortgage lenders are continuing to increase high loan-to-income (LTI) and loan-to-value (LTV) borrowing, according to official data.


However, buy-to-let lending hit its lowest ebb since the fourth quarter of 2012, claiming just 12% of all new lending completed.

Figures from the Bank of England revealed that overall gross mortgage lending increased 4.4% over the first three quarters of 2018 to total £202.67bn, up from £194bn in the same period last year.

In the third quarter alone, lending was up 3.7% at £73.5bn from the £70.9bn between July and September last year.

The highly competitive nature of the market was also evident.

Despite the increase to Bank Base Rate in the middle of the period, the share of mortgage loans advanced with interest rates less than 2% above Bank Rate continued to increase in Q3, reaching 82%.


High LTI and LTV

The data also supports other industry analysis suggesting lenders are increasingly helping first-time buyers and those with smaller deposits as housing affordability becomes ever tighter.

The proportion of high LTI lending, which comprises loans above four times the value of annual income for a single buyer or above three times the annual income for joint buyers, is continuing to grow.

In the third quarter it increased 1.8 percentage points to reach 47% of all new lending completed.

Meanwhile, the share of loans with an LTV exceeding 90% also increased to 4.3%.

And the share of lending with LTV at or below 75% fell a further two percentage points to 62%.


Arrears starting to rise

Arrears also grew for the first time since the second quarter of 2016.

The value of outstanding mortgage balances with some arrears increased to £14.5bn from £14.3bn in the previous three months.

While these balances account for only 1% of the total amount lent, it could be start of an increasing arrears trend which trade body UK Finance has warned about.

Spicerhaart Corporate Sales managing director Mark Pilling warned that with credit card debt soaring too, there was a danger more borrowers and renters may find themselves struggling.

“With the recent rate rises, I had predicted we would start to see arrears rise again, and I fear this could be the start of a more permanent shift,” he said.

“Consumers racked up a record £17.1bn of credit card debt in October, 11.6% higher than a year earlier, and October is not usually a month associated with big spending.”

Although the vast majority of mortgages held are on fixed rates, Pilling added that if there was another rate rise or rise in the cost of living, those coming off a fixed-rate deal may struggle to make their monthly mortgage payments.


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