Risky house loans rise to highest since 2008 as property recovers

LARGE property loans, for buyers with a deposit worth less than 15 per cent of the house’s value, are more available now than at any point since the financial crisis.

According to data released by LSL Property Services Group today, more high loan-to-value mortgages were extended to people buying houses in June than in any month since September 2008. Loans that are large in comparison to the value of the property tend to be considered more risky.

The number of loans with small deposits has soared over the past year, rising by 47 per cent, from 4,790 in Jun 2012 to 7,046 last month. There was a 23 per cent increase in mortgage lending generally.

Richard Sexton, director of e.surv, part of LSL’s group, said: “Lending has risen hugely since last year, it’s true. But there’s a twist in the tale”, adding, “the increase in lending has been focused in the hot spot of London, and the surrounding south east. It’s not a deliberate policy from lenders, it’s just a case of there being more equity-rich buyers.”

In the euro area, the picture for property is much less buoyant. House prices fell by 2.2 per cent in the first quarter of this year, in comparison to the first quarter of 2012. Prices fell considerably during the financial crisis, and have struggled to recovery since.

The countries which saw the largest falls are on the EU’s struggling periphery: Spanish and Cypriot prices fell by 5.1 and 4.8 per cent respectively, and Portuguese prices dipped by 3.2 per cent in the same period.