Riskier house lending rises to five year high

MORTGAGES with smaller deposits now make up the largest share of the mortgage market in five years, as the credit market recovers.

In the first quarter of 2014, mortgages with higher loan-to-value (LTV) ratios were growing as a share of the market, according to statistics released by the Bank of England yesterday. Loans worth 90 per cent or more of the property’s value now make up 3.6 per cent of mortgage lending, the highest level since the end of 2008.

Single individuals taking out mortgages worth more than 3.5 times their income, and joint-income households borrowing more than 2.75 times their income also now make up 2.6 per cent of lending, the most in over five years.

Though the share of riskier loans is rising, it is still significantly below pre-crisis levels, when such mortgages made up 14 per cent of lending.

The Bank’s stats also show that £9.4bn was loaned to people buying their first home in the quarter. Credit to first-time buyers is growing more rapidly than the general market. Gross advances rose 45.6 per cent to £31.3bn.

“Despite rigorous new mortgage criteria, demand for first-time buyer property will not lose steam – helped along by lower deposit requirements and affordable mortgage interest rates coupled with wage growth,” said David Newnes of Reeds Rains.