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High loan-to-income lending at highest levels since 2007 – BoE and FCA

  • 12/03/2019
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High loan-to-income lending at highest levels since 2007 – BoE and FCA
The value of residential mortgage lending in Q4 2018 was 3.3% higher than in the same period the previous year, the latest data from the Bank of England (BoE) and Financial Conduct Authority (FCA) showed.


Residential lending stood at £1,44bn in Q4 for 2018 and the value of new mortgage commitments was £68bn – 4.6 higher than a year earlier. The value of gross mortgage advances grew 5.5% in the year to 2018 Q4, to £72.9bn.

There were signs that borrowers are ignoring the economic uncertainty in the UK and taking advantage of the availability of high loan to value (LTV) mortgages, as 4.4% of mortgages advanced in Q4 had LTV ratios exceeding 90%, compared to 3.8% a year earlier.

The proportion of lending at more than four times individual borrowers’ annual income remained at 46.9% in Q4 – its highest value since the BoE and FCA began publishing quarterly residential mortgage lending figures in 2007.

The share of lending for remortgage was 1.4% higher than a year earlier, at 31.1%, while the share for house purchase was one per cent lower, at 63.5%.

As a component of lending for house purchase, the percentage of lending to home movers fell 0.9% in the year to Q4, to 29.7% of gross advances.

The other two components were broadly unchanged in the year with 21.2% of lending to first-time buyers and 12.5% for buy-to-let purchases.

Cheap borrowing trumps uncertainty

Keith Haggart, managing director at lifetime mortgage provider Responsible Lending, said: “Buyers are stuffing their pockets while they can, with the proportion of high loan-to-income loans higher than at any time since 2007.

“Low interest rates are responsible for this, and cheap borrowing continues to trump economic outlook when it comes to borrowers’ appetite to forge ahead.

“Remortgages are taking an increasing slice of the pie and that’s to be expected because we already know transaction volumes remain on the floor by historic standards.

“Volume of sales will have to improve before this trend moves back in the other direction but it is owner-occupiers whose activity remains sluggish. First-time buyers have not been deterred from the market at all. They are going to be on the ladder for longer and clearly believe property is still a rock solid investment over the long term.”

Arrears fall slightly

The value of outstanding balances with some arrears fell slightly in Q4 to £14.4bn. As a proportion of total balances it has remained at one per cent.

Mark Pilling, Spicerhaart Corporate Sales managing director, welcomed the latest figures on arrears but said: “It is good news that arrears remain historically low, but there is a danger that people could start to struggle, post-Brexit, with predictions from Kensington this week that a no-deal Brexit could see arrears rise by a third.”

“Arrears and repossessions – currently at a 40-year low – remain low, not necessarily because people are no longer experiencing financial difficulties but because lenders are now doing everything they can to help borrowers who are struggling or may struggle in the future to avoid going down the repossession route.”


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