Under embargo until 00:01 Thursday 16th April 2015

April 2015

 

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Pre-election pause dampens demand for mortgages • House purchase approvals dip 2.4% from February to March, with 60,280 loans approved

• First-time buyers particularly cautious in the run-up to the General Election: higher LTV loans see a marked reduction, with just 9,343 such loans in March – down 10.5% from February

• Nevertheless, higher LTV lending remains strong in the North – Yorkshire and the Northwest hold the highest proportion of higher LTV loans

House purchase approvals dropped in March as borrower uncertainty slowed demand in the run-up to the General Election, according to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor.

With the election closing in, there were just 60,280 loans for house purchase made this March, a 2.4% dip from the 61,760 seen in February.

This figure also represents a 10.0% drop compared to March 2014, when there were 66,970 such loans. This is, however, the smallest annual fall seen for half a year, as we move past yearly comparisons with what proved to be a one-off peak in lending last year.

On a quarterly basis, there were 182,747 house purchase approvals in Q1 2015, compared to 178,579 in Q4 2014.

Richard Sexton, director of e.surv chartered surveyors, explains: “The supply of accessible mortgages remains strong, but demand has wavered in the face of an uncertain General Election. This is an unwelcome though not unexpected setback. You can lead a horse to water, but you can’t make it drink.

“The fact we’ve only experienced a minor jitter in the face of great uncertainty is testament to the resilience of the renewed mortgage market. The trend is still towards growth: there were 2.3% more house purchase approvals

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in Q1 2015 than Q4 2014. We have to expect to come up against outside influences on homebuyers from time to time.”

Smaller-deposit borrowers retreat in March

Borrowers with deposits worth 15% or less of their property’s total value have fallen back in March, a downturn from the resurgent trajectory seen in the preceding four months.

In March, there were just 9,343 house purchase approvals made for borrowers in this bracket, down 10.5% from February’s 10,437, but only 5.1% below the 9,845 approvals seen in March last year.

Smaller-deposit borrowers have also dropped back as a proportion of all house purchase approvals, representing just 15.5% of borrowers in March, compared to 16.9% in February.

The most recent Credit Conditions Survey from the Bank of England stated that the supply of loans for house purchase increased in the first quarter of the year, but demand decreased in the same period.

Richard Sexton, director of e.surv chartered surveyors, comments: “Smaller deposit borrowers, typically first-time buyers, are among the most cautious borrowers. Picture yourself buying a home for the first time – investing a carefully husbanded nest-egg into a property you want to enjoy and likely resell at some point in the future. It’s understandable that they might want to wait for the dust to settle after the election before they make the leap.

“Higher LTV loans are still available to borrowers who want them. The Help to Buy scheme expanded in March to include a new ISA available exclusively to first-time buyers, helping them to build that all-important deposit. With the price war between banks producing attractive fixed rate deals, it’s an excellent time to be a first-time buyer.

“While these pre-election cold feet may prove to be temporary, the underlying problem of the housing shortage still needs to be addressed. Attractive deals and rewarding schemes can only carry the market so far: more homes need to be built for borrowing to flourish.”

Regional snapshot: Lending to borrowers with smaller deposits falls across the UK

The proportion of higher LTV lending has fallen in most UK regions compared to February. Northern Ireland has been hit the hardest, with the proportion of higher LTV loans in the region falling from 27% to just 22% of total house purchase lending. Higher LTV lending also took a hit in the Northwest, falling from 24% to 21% as a proportion of house purchase lending in the area.

Region Proportion of higher LTV loans (March 2015)

Proportion of higher LTV loans (February 2015)

Yorkshire 25% 26% Northern Ireland 22% 27%

Northwest 21% 24% Midlands 20% 22%

UK Average 17% 18% Scotland 16% 16% Eastern 16% 17%

   

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South/South Wales 15% 15% South East 11% 11%

London 6% 8% Richard Sexton, director of e.surv chartered surveyors, concludes: “Help to Buy is continuing to work in the areas that need it most: the North West and Yorkshire – areas which have been slower to recover from the recession, where buyers typically still have lower incomes.

“The Help to Buy ISA announced in the Budget isn’t going to kick in until the Autumn, but it’s a sign that things are heading in the right direction from a legislative point of view. What still needs to happen is serious support for housebuilding, targeted at the areas struggling the most.”

LOANS FOR HOUSE PURCHASE - seasonally adjusted

Month Number Monthly change Annual change

October 59,377 -3.2% -13.3% November 58,944 -0.7% -16.9% December 60,258 +2.2% -16.7% January 60,707 +0.7% -19.5% February 61,760 +1.7% -11.6%

March 60,280 -2.4% -10.0%

– ENDS –

Notes to Editors

Methodology

e.surv analyses detailed data on over one million mortgage valuations the firm carried out between August 2006 and today. Each month, the researchers analyse tens of thousands of valuations and use these trends to extrapolate from the Bank of England’s mortgage data to publish mortgage approval numbers for the whole of the UK, weeks before the BBA, CML and Bank of England.

The Mortgage Monitor is prepared by The Wriglesworth Consultancy for e.surv. The copyright and all other intellectual property rights in the Mortgage Monitor belong to e.surv. Reproduction in whole or part is not permitted unless an acknowledgement to e.surv as the source is included. No modification is permitted without e.surv’s prior written consent.

Whilst care is taken in the compilation of the report, no representation or assurances are made as to its accuracy or completeness. e.surv reserves the right to vary the methodology and to edit or discontinue the report in whole or in part at any time.

About e.surv

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e.surv is one of the UK’s largest valuation providers, directly employing surveyors across the UK, supported by a network of consultant valuers. The business is the largest distributor and manager of valuation instructions in the UK and is appointed as Panel Manager for more than 20 mortgage lenders and other entities with interests in residential property. The business also provides a number of private survey products direct to the home-buying public. e.surv is a subsidiary of LSL Property Services plc. For further information, see www.lslps.co.uk.

Press contacts

Tora Turton, Instinctif Partners, victoria.turton@instinctif.com, 020 7427 1445

Justin Blanchard, Instinctif Partners, justin.blanchard@instinctif.com, 020 7427 1407