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Mortgage commitments soar as high-LTV lending plummets and rates rise – FCA

  • 09/03/2021
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Mortgage commitments soar as high-LTV lending plummets and rates rise – FCA
The value of mortgage commitments for new lending soared to its highest level in 13 years in the final three months of 2020, according to the Financial Conduct Authority (FCA).


Lending committed from October to December totalled £87.7bn, up 24 per cent on Q4 2019 and the highest since Q3 2007.

However, data from the regulator showed that lending above 90 per cent loan to value (LTV) dropped sharply compared to the same period the year before, as well as during 2020 as a whole.

Just 1.2 per cent of mortgages completed in the quarter were between 90 and 95 per cent LTV, down from 5.7 per cent in Q4 2019.

This was also reflected in the annual total, where just 3.2 per cent of mortgage lending, totalling £8.1bn, was in the high LTV range during 2020 – down from £14.3bn the year before.


Margins and rates rise

The FCA data also revealed a notable rise in interest rates and lender margins during the year. More than a quarter of Q4 loans were taken out at between two per cent and three per cent above the Bank of England Base Rate – the first time since early 2017 this level was reached.

Just 65 per cent of lending was completed at less than two per cent above base rate.

Fixed rate mortgages accounted for 92 per cent of all completions and the average fixed rate taken out rose slightly to 2.06 per cent.

However, when considering the Bank of England’s Base Rate cut of 0.65 per cent during 2020, adding this on to a typical mortgage rate would take it to levels seen in early 2016.


BTL and FTBs steady

Overall, the FCA figures showed new mortgage lending was £249bn in 2020, down by 10 per cent from £276bn in 2019.

The lending figures are slightly larger than those published by the Bank of England earlier this year, but the rate of change is the same.

Buy-to-let lending remained in line with the overall mortgage market during 2020, dipping by just over 10 per cent to hit £31.9bn, down from £35.7bn the previous year.

First-time buyer numbers grew in Q4 having been badly hit earlier by the pandemic and so recovered to again account for 21 per cent of purchases over the course of the year.

Meanwhile, the value of outstanding balances with some arrears increased by 3.4 per cent over the quarter to £14.3bn, and now accounts for 0.93 per cent of outstanding mortgage balances.




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