Insurance News
Mortgage approvals drop to lowest level since December 2010
13th April 2012
The withdrawal of the stamp duty holiday and increased emphasis on responsible lending appears to be having a negative impact on the housing market as mortgage approvals for purchases in March dropped to their lowest point since December 2010, the latest Mortgage Monitor from e.surv chartered surveyors has revealed.
Reflecting a seven per cent drop compared to March 2011, the statistics are reportedly a result of a decline in lending to first-time buyers as many banks restricted the availability of their high loan-to-value (LTV) deals that benefit those with smaller deposits.
Indeed, prospective buyers with a deposit of 15 per cent or less accounted for only ten per cent of all loans last month and this was the fourth consecutive month that lending to people in such a position declined.
Increased funding costs were highlighted as the main reason that lenders have been more frugal with the way in which they approve loans, as they no longer appear as willing to grant finances to higher-risk borrowers.
"Up until now high street mortgage lenders have been able to absorb steadily increasing costs, rather than passing them onto the consumer," said Richard Sexton, director of e.surv.
While the restricted availability is expected to hit first-time buyers hardest, buy-to-let investors are also predicted to suffer, and Mark Abrahams, chief executive officer of West One Loans, told Property Wire that bridging loans may rise as a result.
"Buy to let lending will fall with loans on cheap properties without kitchens or bathrooms hit hardest despite sky high demand. Brokers should take heart that this should fuel the bridging sector," he said.
As such, investors looking to convert buildings will be looking for new ways to secure the necessary financial backing and will also need freeholder insurance cover if they are to put these on the letting market as a property for multiple occupations.
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