Highest number of house purchase approvals in year-and-a-half

  • Summer sees mortgage market strengthen, with 72,712 house purchase approvals in June – largest number since January 2014
  • Largest month-on-month improvement since February 2009 as approvals rise 12.8% from May
  • Highest number of smaller-deposit borrowers seen in over seven years, with 12,288 higher-LTV loans approved in June

House purchase approvals rallied in June, with strong improvements on both a monthly and annual basis as political uncertainty subsided, according to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor.

There were 72,712 house purchase approvals in June, up 12.8% on the 64,434 recorded in May, making June the strongest month for house purchase loans in seventeen months (since January 2014).

The monthly increase – as confidence returned to the market following a period of political uncertainty – is the largest month-on-month improvement since February 2009.

House purchase approvals have also risen significantly on an annual basis, with this June seeing 10.5% more approvals than the 65,794 recorded twelve months ago.

Richard Sexton, Director of e.surv chartered surveyors, comments: “This is the summer comeback we’ve been waiting for. Potential borrowers clearly paused their actions whilst the election came and went. But now borrowers are back in the market for mortgages and demand is stronger than ever. Interest rates have remained at record lows with a dovish outlook from the Bank of England’s Monetary Policy Committee, and we’re seeing a bevy of fixed-rate options as banks compete for buyers’ business.

“MMR has already tightened up the nuts and bolts, and lenders are now putting hands on deck to make sure they’re shipshape for the EU Mortgage Credit Directive peeking over next year’s horizon. More positivity among buyers and lenders alike means the market is now on a stable course of sustainable lending.”

Large uptick in small-deposit lending

June also brought an increase in the number of higher LTV borrowers (with a deposit worth 15% or less of their properties’ total value) as well as an increase in their share of total house purchase mortgage approvals.

There were 12,288 approvals for higher LTV house purchase loans in June, a 17.7% improvement on the 10,438 recorded in May and up 5.5% on the 11,646 seen in June 2014.

Meanwhile, higher LTV borrowers represented 16.9% of all house purchase approvals in June, increasing from 16.2% in May.

The combination of this growing proportion and a strong June performance from the wider mortgage market has allowed the number of higher LTV loans to reach its highest monthly volume since April 2008, when there were 12,572 approvals in this category.

Richard Sexton, Director of e.surv chartered surveyors, comments: “It’s a clear case of growing confidence spreading beyond those already securely on the property ladder. Higher LTV borrowers – typically first-time buyers – are still reaping the benefits from initiatives like Help to Buy.

“But this significant increase in lending to borrowers with smaller deposits goes deeper than the various plans in place to help this group. It’s a sign that the nation’s finances are getting back in order, with wage growth starting to mount and an economy ready to shake off the doldrums and get back to work. More people in better employment is making it easier for people to pull together deposits, even in the face of low interest rates, as people are able to move more from their pay-cheque into their housing piggy bank.”

Regional snapshot: Smaller deposit borrowers shore up Northern strongholds

Lending to borrowers with deposits worth 15% or less of their property’s total value has improved as a proportion of total home purchase lending in many northern regions in June.

Yorkshire remains the region with the largest proportion of higher LTV house purchase loan approvals – but the proportion hasn’t shifted from the previous month. This means that the North West could be set to overtake Yorkshire as the new home for first-time buyers, as it displays a strong month-on-month increase in this category of lending. Higher LTV lending comprised 25% of all North Western house purchase approvals in June compared to 23% in May.

Richard Sexton, Director of e.surv chartered surveyors, concludes: “Higher LTV lending is very clearly concentrated in the North of the country. It’s good that schemes to help borrowers build those all-important deposits are finding traction in these areas – but could suggest that they need to broaden their focus.

“It’s not enough to support just one half of the country. An intelligent and flexible response is needed from these schemes to ensure that Help to Buy reflects more than just the comparative affordability of housing – it needs to reflect the reality of differential job opportunities by region.”

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