Higher-LTV lending squeezed as purchases soar

House purchase values rose 20% in the final quarter of 2015 yet there was also a worrying drop in higher-LTV lending.

The Bank of England's latest Mortgage Lenders and Administrators Return statistics showed the value of house purchases hit £43.7 billion in the fourth quarter, up from £36.4 billion in Q4 2014.

But lending between 90% and 95% LTV accounted for just 3% of this, down from 3.5% in Q4 2014.

Brian Murphy, head of lending at Mortgage Advice Bureau, said lenders have a strong appetite for new business, with gross advances a fifth higher in the final quarter, year-on-year.

“Low mortgage rates ease the burden of repayments, making now a great time to get a mortgage for those who already have a deposit saved."

But he said the dip in higher-LTV loans is forcing borrowers to raise larger deposits to access the housing market. “With prices continuing to rise, it is important that homeownership is supported through the provision of higher LTV products.”

Jeremy Duncombe, director, Legal & General Mortgage Club, said the dip in higher-LTV lending will make life harder for first-time buyers and those with smaller deposits.

He said inadequate housing supply is preventing the property market from returning to full health.

Steve Griffiths, head of sales and distribution at Kensington, welcomed the increase in lending but warned that many creditworthy borrowers such as the self-employed and contract workers are being edged out.

“We need to make it clear that we are open for business to a diverse range of customers, not just those who tick all the boxes of a standard mortgage application.”