Home purchase lending hit its highest level for 11 months. November saw 53,259 home purchase loans released to hopeful homeowners, the most in a single month since January 2012, according to e.surv chartered surveyors.
The Funding for Lending Scheme (FLS) has been praised by many for encouraging this boost in the lending market but what has been made apparent is that the majority of the loans have been to applicants looking for large mortgages. Lending on all properties valued £500,000 to £750,000 has increased in November, suggesting bank’s preference is towards lending to wealthier customers.
However, while the wealthy have benefitted from the FLS, first time buyers have been losing out. Properties valued below £125,000 made up just 22% of the total house purchase lending, this was the lowest proportion of the total lending in 14months. This may suggest that fewer first time buyers were able to obtain a mortgage. This is coupled with small deposit lending hitting its lowest mark since July 2011. Loans with a deposit of less than 15% LTV made up just an eleventh of the total loans released in November.
Furthermore, while overall lending improved by 1% from October to November, small deposit loans dropped by 6%, thereby suggesting that the slight improvement in first time buyers from September to October was more of a minor spark than a sign of significant improvements in the market.
These findings therefore suggest that the FLS has so far failed to generate growth in the first time buyers’ market. While the scheme has lowered mortgage rates, lenders are still exercising strong caution and so are sticking with those who primarily have larger deposits. While this is a positive aspect, e.surv’s business development director Richard Sexton says that ‘if the market is to start a proper long-term rehabilitation, it will need a sustained improvement in first time buyer lending’.