Lending up 6% as more buyers use high LTVs: BoE

Gross mortgage lending grew by 5.5 per cent in the last quarter of 2018 compared to a year earlier as more borrowers took high loan-to-value deal, according to the Bank of England

The latest figures show that the value of gross lending was £72.9bn in the three months to the end of December, compared to £69bn in the same period of 2017.

The proportion of mortgages with an LTV higher than 90 per cent grew from 3.8 per cent to 4.4 per cent year on year.

The percentage of lending to home movers fell 0.9 percentage points in the year to Q4, to make up 29.7 per cent of all mortgages for house purchase.

The other two components  of lending for house purchase were broadly unchanged in the year with 21.2 per cent of lending to first-time buyers and 12.5 per cent for buy-to-let.

The proportion of high loan-to-income lending, which is defined as loans greater than four times a single buyer’s income or three times joint buyers’ combined income, remained static at 46.9 per cent, its highest value since the series began in 2007.

Private Finance director Shaun Church says: “The fact that high loan-to-income lending now represents almost half of overall lending should not be cause for concern.

“Rigorous stress testing remains in place which ensures no borrower will be granted a loan they cannot afford in the long-term.

“The stress testing rates applied are much higher than the likely increase in interest rates, so even when today’s low rate environment ends, borrowers should be able to afford higher repayments – assuming they have not seen a dramatic change in their circumstances.”

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