News Review: Lending
Lenders making concerted efforts on LTVs by
David Finlay, intermediary channel director, Barclays
On the surface there appears some good and bad news from the December lending figures. The recent Council of Mortgage Lenders’ data shows that gross mortgage lending in December was an estimated £11.7bn, rep- resenting a 12% drop from £13.2bn in November but a 12% rise from December 2010 (£10.5bn). However, there is certainly no need to dwell on the fact that December showed a fall in lending compared to No- vember as this is inevitable. What we should be highlight- ing are that facts that Decem- ber was the fifth month in a row of higher year-on-year lending and that estimated lending in 2011 totalled £140bn which was slightly above the CML’s annual forecast of £138bn. This also represents a 3% rise from the £136 lent in 2010. These figures signify a wel-
come and highly positive start to what will be another chal- lenging but exciting and op- portunity laden year.
Intermediary Has it really been over four years and counting since the onset of the credit crunch? Granted working through this period seemed to take an eternity but in the same respect it feels like only yes- terday. Of course the impact of these barren years have seen intermediary numbers fall dramatically but accord-
ing to recent figures from the Financial Services Authority this slump has slowed in the final months of 2011. The year-on-year decline in the number of authorised ARs slowed to 8.1% in De- cember 2011, down from 9.7% in September and 30.8% in December 2010. There were said to be 2,425 ARs left in the market in December 2011 from its peak of 5,123 in December 2007, representing an overall fall of 52.7%. Meanwhile, the number of
DA firms whose primary cate- gory of business is mortgages fell by 2.8% between Septem- ber and December 2011 to reach 1,512. This marks an annual decline of 12.4% com- pared with the 1,726 firms in the market in December 2010, which is almost half the year-on-year fall of 21.5% seen between December 2009 and 2010. The number of DA firms has now fallen by 52.7% compared with a peak of 3,533 in January 2006.
“LTV levels have long been cited as one of the major barriers hampering the progression of the market”
This period has weeded out some of the more unscrupu- lous element but has also re- sulted in many good advisers leaving the sector. However, the firms that are left have evolved, adapted, diversified and inevitably had to become better, more efficient and
10 MORTgAge INTRODUCeR FEBRUARY 2012
more professional. In short the best have survived and are in good shape to take ad- vantage of the many opportu- nities presenting themselves in the modern, post-credit crunch mortgage market.
Loan to values
Economic conditions and outside influences continue to provide numerous obsta- cles for borrowers, lenders and intermediaries alike. LTV levels have long been cited as one of the major barriers hampering the progression of the market but thankfully there are continuing signs that constraints around this issue are loosening. Accord- ing to the latest mortgage monitor from
e.surv the num- ber of mortgages advanced at an LTV of 85% or more in- creased by 32% between 2010 and 2011. There were 57,301 loans said to be at an LTV of 85% or higher in 2011, up from 43,379 in 2010. Lenders are certainly mak- ing concerted efforts in this area despite turmoil in the eurozone and the UK’s rela- tively slow economic growth. 2012 will remain a tough one in terms of funding condi- tions but let’s hope that these small strides continue as we look to steadily boost LTV levels in the responsible man- ner that the market requires and demands.
Affordability Another component high on the list of the numerous bor- rowing requirements is mort- gage affordability. Recent analysis from Barclays found that the array of cheap mort- gage deals on offer last year helped make homeowners’
monthly mortgage payments in 2011 the most affordable for 10 years.
“Lenders are certainly making concerted efforts in this area
despite turmoil in the eurozone and the UK’s relatively slow economic growth”
The analysis of more than one million customers’ ac- counts found that, on aver- age, people paid out 15.4% of their take home pay last year to cover their monthly mort- gage payments, compared to 2008 when it reached its high- est point at 20.5%. The lowest point since records began 10 years ago was in September 2011 when the average mort- gage payment fell to 15.2% or £488 a month. These figures support opinion research commis- sioned by Barclays that found the majority of homeowners say they are more comfort- able with their current pay- ment levels compared to this time last year. The poll of UK homeowners found that 83% have room for manoeuvre should their circumstances or interest rates change and 64% find their mortgage afford- able, compared to 52% this time last year. However, the question remains are home- owners making the most of these affordability levels? Not necessarily.
www.mortgageintroducer.com
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