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Mortgage lending dips in Q2 as fixed rate and high LTV take-up hit peaks – BoE

  • 10/09/2019
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Mortgage lending dips in Q2 as fixed rate and high LTV take-up hit peaks – BoE
Gross mortgage lending in the first half of 2019 was unchanged on the same period last year following a slight dip in the second quarter of the year.


Official data from the Bank of England (BoE) also showed new highs in the proportion of mortgage lending taken out at fixed rates and the volume of loans at higher loan to value (LTV).

BoE figures showed mortgage lending from January to June was £129.5bn, barely changed from the £129.2bn completed in the same period last year.

April to June saw £66.1bn loaned, down one per cent from Q2 2018, which bucked the improvement made in the first three months of the year.

The central bank noted the value of new mortgage commitments – which is lending agreed to be advanced in the coming months – was also broadly unchanged compared to 2018 at £73.4bn.


New highs

The bank revealed that 92.19 per cent of mortgages completed were done so with a fixed rate deal, the highest proportion since the BoE’s records began at the start of 2007.

And its data also showed the continued growth in lending at higher LTVs, with 5.5 per cent of mortgages exceeding 90 per cent LTV, the highest since 2008 Q4.

The proportion of lending at high loan to income (LTI) ratios was 46.1 per cent in 2019 Q2, 0.7 per cent higher than a year earlier.

Lending to owner-occupiers for house purchases accounted for 50.5 per cent of total gross mortgage advances in Q2.

Of this, 21.3 per cent was to first-time buyers, consistent with a year earlier while the share of lending to home movers increased marginally in the year to 29.2 per cent.

Meanwhile the share of gross mortgage lending for buy-to-let purposes covering purchase, remortgage and further advance, was 13.1 per cent, also in line with 2018.

Encouragingly, the value of outstanding balances with arrears fell by 1.7 per cent to £14.2bn, while the proportion of total loan balances in arrears decreased again, falling from 0.99 per cent to 0.97 per cent, which is the lowest since these figures were introduced in 2007.


Spreading too thin

Spicerhaart Corporate Sales managing director Mark Pilling was pleased with the falling arrears but warned that it did not necessarily mean people were not experiencing financial difficulties.

“Instead, what I think we can take form these figures is that lenders are continuing to do all they can to help borrowers who are struggling, to ensure that repossession is always the last option,” he said.

“Another more worrying trend that we can see from these stats is that the number of mortgages with higher LTVs is continuing to increase. This suggests some borrowers may be stretching themselves too thin, and if rates do rise, they may start to struggle with their repayments.”

Private Finance managing director Simon Checkley, noted that the popularity of mortgages with higher than 90 per cent LTV had been vital in enabling those with smaller deposits to purchase their first home.

“Those concerned that borrowers might be overstretching themselves should take comfort in the fact that while high LTV products do come with a slight premium, in today’s low rate market, they’re incredibly affordable,” he said.

He added: “It’s always preferable for borrowers to opt for a product at the lowest LTV possible to secure the best rate and minimise the amount of interest repaid.

“However, it’s not always realistic to save a hefty deposit, so many prospective first-time buyers will be encouraged by the flurry of high LTV products that have launched onto the market, giving those otherwise locked out of homeownership their first step onto property the ladder.”



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