The outstanding value of all residential mortgage loans was £1,451bn in the first quarter of 2019, 3.4 per cent higher than in the same period last year, despite Brexit uncertainties amounting.
Figures published by the Bank of England (BoE) in its Mortgage Lenders and Administrators Statistics – 2019 Q1 also revealed that the value of new mortgage commitments was £63.8bn, 4.5 per cent higher than Q1 2018.
This figure suggested that not all prospective buyers are deterred by the current landscape, or by the possibility of interest rates increasing, as a growing number of home buyers take out mortgages with a loan to value (LTV) ratio of more than 90 per cent, rising to 4.5 per cent from 3.3 per cent a year earlier. This is the highest recorded level since Q2 2017.
However, Spicerhaart Corporate Sales managing director Mark Pilling indicated that this figure may not be as reassuring as initially suggested.
“Borrowers are taking out bigger and bigger loans. The number of mortgages with LTVs above 90 per cent increased by 4.5 per cent (compared to 3.3 per cent a year earlier) the highest since 2017, while the proportion of lending to borrowers with high loan to income ratios (more than four times their salary for single incomes and three times for joint) rose to 45 per cent.”
“This suggests that many borrowers are stretching themselves too thin, and if and when rates do rise, they may start to struggle,” Pilling warned.
The Spiceerhart executive urged lenders to assess all the cases on their books and, if they have concerns about borrowers who are already struggling, or are likely to down the line, “speak to them sooner rather than later” in order to consider all possible options.
Lending to owner occupiers for house purchase accounted for 46.1 per cent of total gross mortgage advances. Of this, 19.2 per cent was to first-time buyers, which is consistent with a year earlier. The share of lending to home movers decreased marginally in the year to 26.9 per cent, the BoE figures found, indicating that many homeowners are holding out for political and economic stability.
The share of lending for buy-to-let (BTL) purposes was also down in Q1 2019, accounting for just under a sixth of mortgages, marginally lower than the fraction reported in Q1 2018.
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