According to recent statistics, fewer applications for mortgage loans are being approved and are apt the lowest level since December of 2010. In fact, only 43,450 mortgages were approved in March and the blame is being placed on the fact that the cost of funding loans is forcing banks to refuse borrowers who only have small deposits.
Furthermore, when comparing year-on-year from March of 2011 there were approximately 7% fewer approvals in March of 2012. This is only compounding the 11% drop in approvals within the month of February. With two successive months in which approvals are falling all indications are pointing towards the fact that the housing/mortgage market is beginning to regress. This comes after almost a year of growth and is worrisome to market analysts.
The belief is that these numbers are the result of the decline in approving mortgages for first-time buyers. The proof of this is in the statistics. A typical property sold to a first-time buyer is generally amongst the cheaper properties and even so approved mortgages fell by 14% in March alone which is the lowest level in over a year.
Properties that are used at £125,000 or less only saw approvals numbering 10,428 in March and 12,247 in February. Approvals are increasingly on the decline and first-time buyers have been the hardest hit because of a reduction in high LTV (loan to value) mortgage loans. Mortgage loans were not written as abundantly for borrowers who had a deposit of 15% for less and actually only 10% of mortgage loans in the month of March were written on high LTV mortgage loans.
Much of this information was provided by data gathered from e.surv which is the nation’s largest Chartered Surveyors for valuation of property. The director, Richard Sexton, states that until quite recently high street lenders had been in a position of absorbing progressively increasing costs but are now reluctant to do so. As a result, those higher costs are being passed down to consumers making it quite difficult for them to qualify for mortgage loans. If this trend continues analysts believe the housing market will be hit hard in the UK.
