Taylor Scott International News
The UK government’s Help to Buy scheme is boosting lending to first time buyers but high loan to value lending activity has fallen year on year, new data shows. Overall 95% LTV mortgage almost doubled under Help to Buy in the first 18 months of the scheme from January 2014 to June 2015 making up £3.43 of every £100 worth of mortgage lending, according to research from private mortgage insurer Genworth. This was up from £1.77 in the previous 18 months as more options have appeared for home owners with smaller deposits. However first time buyer and 95% LTV lending activity fell year on year in the second quarter of the year, marking the second quarterly decline in a row, the first time this has happened since 2010/2011 Total mortgage lending across the whole market grew by £48.2 billion which means that as the mortgage market has grown during this period, £12.24 of every extra £100 lent has been via 95% LTV mortgages. Genworth’s analysis shows that first time buyers account for almost £21 in every £100 lent during the first half of the Help to Buy 2 (HTB2) scheme compared with £19.33 in the previous 18 months. This compares with just £11.41 per £100 in 2007/2008 and highlights how the scheme has played an important role in encouraging first time buyer lending. The growth in 95% LTV is an encouraging sign for a sector that was hit hard by tightening credit conditions during the recession, exacerbating the challenges of raising a big enough deposit to buy a home. But the report suggests that concerns linger for long term health of the 95% LTV market. Both 95% LTV lending and first time buyer lending declined by value year on year during the second quarter of 2015 for a second successive quarter. This is the first time this has happened for two consecutive quarters since the lending drought from the fourth quarter of 2010 to the third quarter of 2011. It contrasts with the substantial growth achieved when Help to Buy was first introduced, and raises doubts about how well activity will fare when it is withdrawn at the end of 2016, particularly with expectations that historically low interest rates will finally start to rise next year, raising costs for borrowers. ‘There is no denying that Help to Buy has played an important part in revitalising the first time buyer and high LTV mortgage market following a significant lending drought. Some participating lenders are now moving towards launching non-HTB2 products, but it remains to be seen whether this will be enough to sustain the benefits of the scheme once it expires,’ said Simon Crone, vice president for mortgage insurance Europe at Genworth. ‘We are potentially facing a situation where the high LTV market could easily fall back into decline with the end of Help to Buy now just over a year away. Even… Taylor Scott International
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