Loan Criteria Getting Tougher For First Time Buyers
Over recent months, there has been an increase in the number of first time buyers entering the housing and home owner loan markets, as many have taken advantage of relatively low house prices and cheap loan deals, particularly for those with a large deposit.
Although figures had been steadily increasing up until April this year, May saw a significant drop in the number of first time buyers entering the home owner loan and mortgage market, despite low loan rates and more lenders offering high loan to value products for this sector of the market.
The latest data from E.surv’s monthly mortgage monitor has shown that first time buyer loan numbers have dropped during the month of May, largely due to lenders tightening their criteria on new home owner loans.
Loan approvals for properties valued at less than £125,000, which are typical first time buyer houses, accounted for only 23 per cent of the home owner loan market in May, compared with 27 per cent in the previous month. Larger loans on more expensive properties increased, as generally, these buyers do not require high loan to value loans.
Although the average loan to value across the home owner loan market has been increasing steadily over recent months, may saw a reverse of this trend, with average loan to values dropping to 60.4 per cent, from 61 per cent in April.
Richard Sexton of E.surv commented on the figures, he said “Those with the least equity in their homes need cheaper loan rates most, so it is important lenders do not make it too difficult to qualify for the best mortgages.”
“Tightening criteria in May are going against this grain. Some lenders are ahead of the pack and are offering good loan deals, but for others it’s not enough just to advertise a good headline rate.”
