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Lending in May dips to lowest level in a year

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
27/02/2024

Mortgage lending last month fell for the third time in a row

Mortgage lending slowed to its lowest level in 12 months in May, as EU Referendum jitters put off many prospective borrowers.

It was the third consecutive monthly drop in lending, according to the Mortgage Monitor from chartered surveyors e.surv, which revealed that there were 65,113 house purchase approvals in May – the lowest number since May 2015.

Monthly declines were also seen in March, down 3%, and April, down 5.8%, equating to a fall of 10.5% in the quarter, and a considerable turnaround from the peak lending seen at the start of the year. In January and February 73,060 and 72,512 house purchase approvals were respectively granted.

Richard Sexton, director of e.surv, said the EU referendum was causing nervousness in financial circles.

“This political milestone could impact the UK’s economic outlook and slowing growth could pose problems of its own for both lenders and borrowers,” said Sexton.

“Juggling these challenges will be key to maintaining the current health of the mortgage market and lenders should brace themselves for possible surprises.”

High LTV lending hit

The volume of small-deposit lending, to those with a deposit with 15% or less of the property’s value, also dropped slightly in May, to comprise 18.4% of total home lending – down from 19.1% the previous month. Meanwhile, lending to those with a deposit of 60% or more increased significantly, accounting for almost a third (30.7%) of all borrowing.

Sexton said more should be done to ensure first-time buyers have access to the mortgage market with smaller deposits.

“Given the demands of saving for a deposit, high loan-to-value lending continues to be crucial to helping aspiring buyers on to the ladder,” he said.

“Low inflation and rising wages can only do so much to combat climbing deposit demands. Meanwhile, some first-time buyer schemes like Help to Buy 2 are due to be phased out at the end of the year. This could curb first-time activity if it means the improvements made to support first-timers start to fall away.”


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