Friday, 10 August 2012 2:26 PM
Mortgage lending bounced back in July after a weak June thanks to an increase in loans to wealthier buyers, according to e.surv.
The chartered surveyor’s latest mortgage monitor says house purchase loans increased by 12 per cent from 44,192 in June to 49,561 in July.
But the increase reflected the weakness of the market in June because of the wet weather and Jubilee rather than an underlying improvement. Loans for house purchase were two per cent lower than in May and one per cent down on July 2011.
And activity over the month was dominated by equity-rich buyers as banks focussed on less risky borrowers and tightened their criteria for high loan-to-value mortgages.
Two-thirds of house purchase loans in July went to borrowers with a deposit of more than 25 per cent. Only 4,708 mortgages – less than one in ten and the lowest proportion since July 2011 – went to borrowers with deposits of less than 15 per cent.
Unsurprisingly, lending to first-time buyers also suffered. There were just 11,399 loans on property worth up to £125,000, a typical first-timer price bracket, which was six per cent down on the average so far this year and one per cent down on a year ago.
In contrast, house purchase loans for property over £500,000 rose 15 per cent and loans for purchases over £750,000 rose 17 per cent.
The results reversed tentative growth in high loan to value lending seen since last Autumn. The average loan to value over the quarter fell below 60 per cent for the first time since the third quarter of last year.
Richard Sexton, business development director of e.surv, said: “The surge in July should certainly be taken with a pinch of salt. It was an exceptionally weak June by historic standards, thanks mainly to all the Jubilee holidays. Lending rose in July because the market was making up for all the time lost in June, rather than because it is becoming easier to get a mortgage.
"It doesn’t hide the two-tier nature of the mortgage market, with equity-rich borrowers dominating activity while many first-time buyers are locked out by banks lack of appetite for high loan-to-value lending. While credit is so scarce, banks would rather focus on sustaining lending to wealthier borrowers and buy-to-let landlords.”