Risky loans are back as house market booms

Tim Wallace
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MORTGAGE lending is up by almost one-third on the year, according to industry data out yesterday, as

borrowers gain confidence and the market gathers pace.

And the belief that a boom could be underway was backed up again by figures from surveyors group e.surv showing a rise in high loan to value mortgages.

In July mortgage lending hit £16.7bn, up 12 per cent on the month and 29 per cent on July 2012, according to the Council of Mortgage Lenders. That was spread over 57,400 house-purchase loans, and 27,000 remortgages.

First-time buyer numbers hit 25,300 in the month, up 41 per cent on the year, out of a total of 57,400 house purchase loans.

Meanwhile high loan to value mortgages jumped 47 per cent in the year to August, according to e.surv data.

It found 7,093 home buyers with a deposit of 15 per cent or less, as banks increase the riskier lending which disappeared in the wake of the financial crisis.

That figure is set to rise further into 2014 as the new Help to Buy mortgage guarantee scheme will help those with deposits below 20 per cent of their house’s value.

The government will top up the deposit with a guarantee, designed to reduce the risk to banks who the chancellor hopes will treat these borrowers as if they had a 20 per cent deposit. As a result they will be able to lend more to those with a smaller savings pot to put towards their home purchase.

“High loan to value lending is the fuel powering the mortgage market recovery,” said e.surv’s Richard Sexton. “Borrowers with smaller deposits fell out of the bottom of the market when the financial crisis hit, but they are returning now in their droves.”