Bad August for mortgage market

The latest Mortgage Monitor, produced by e.surv chartered surveyors has found house purchase loans fell to the third worst August figure for 20 years.

Only 2008 and 2010 saw lower lending levels and August marked the third consecutive month of falls on an annual basis.

The mortgage market moved back towards 2010 levels with the 8% fall to a year-on-year figure of 48,913.

The contraction is thought to be the result of a sharp fall in lending to borrowers with deposits of less than 15%.

Just 4,950 loans were made compared to 5,463 in August 2011.

This fall in lending meant that one in ten house purchase loans came from those with under 15% deposits down from one in seven in January.

Richard Sexton, business development director of e.surv, said: “Much of the progress the mortgage market has made since summer 2011 has been unravelled by the double-dip recession.

“Lending volumes — particularly to first time buyers — are slipping back towards the dismal levels we last saw in 2010 and early 2011.”

The period between August 2011 and May this year saw an average of 52,343 house purchase loans per month. Since May this has dropped sharply by 11% to 46,783.

E.surv’s analysis has found more landlords have stepped in to fill the vacuum left by first-time buyers at the bottom of the market.

Despite the 8% year-on-year fall, approvals on property worth less than 125,000 only fell by 4% as landlords looking to take advantage of record rents purchase cheap property that remains out of reach of first-time buyers.

Mr Sexton said: “With rents pushed up to record levels, landlords are piling in to cheap property.

“Tight mortgage lending conditions are a virtuous circle for landlords and vicious one for first-time buyers.

“The fewer first-time buyers there are, the cheaper property becomes for landlords, and the more expensive rents get.

“We expect landlords to continue to represent a disproportionate share of the buying market in the medium-term.”

Today's Conveyancer