E.surv reports lowest levels of mortgage approvals in 18 months

The number of mortgages approved to buy homes in October (46,507) shrank to the lowest level since May 2009 on a seasonally adjusted basis, down 18% compared to October 2009, and down 2% compared to September 2010 according to e.surv.

Remortgage volumes are higher than a year ago (up 7.7%) but remain close to historic lows. Mortgage approvals for house purchase fell 2% in October, while loan to value ratios fell again as lending criteria tighten. There was a big difference in the performance of the market at the top and bottom end. Loan-to-value ratios are highest on low value homes while borrowers buying higher value homes need much lower mortgages as a percentage of the purchase price. Lower value homes saw fewer mortgages approved while mortgage volumes for more expensive ones actually rose. The volume of mortgages offered to homes valued below £500,000 fell 8.5% month on month (not seasonally adjusted), while 3% more loans were offered to those buying homes worth more than this amount.

Richard Sexton, business development director of e.surv said: “The Bank of England has just reported a subdued September, but October saw the market slow further. The fall in approvals reflects both reduced demand for mortgages and tighter lending criteria from banks and building societies nervous about the outlook for the housing market. The squeeze on LTVs is consistent with nervousness among borrowers and lenders, too. It is at the bottom of the housing ladder where these trends are most apparent. Richer borrowers seem much less worried. For them, mortgage volumes are up and lending is getting more generous, mainly because their equity cushion tends to be so much larger. The remortgage market is still moribund on a historic comparison. The increase on a year ago reflects the fact that some borrowers are more nervous about the outlook for interest rates, but it is unlikely rates will rise in the short term.”


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