LSL forecasts 21% crash in mortgage approvals as FTBs fizzle away . . .

Loans for house purchase fell 21% in February as the rush of first-time buyers trying to beat the Stamp Duty deadline fizzled out.

The prediction is in this morning’s Mortgage Monitor, published monthly by e.surv chartered surveyors, part of the LSL group.

It is in seeming contradiction to a report by rival surveyors Connells, which this week said February had been particularly busy because of a rise in valuations for would-be first-time buyers. If Connells is correct, then approvals for first-time buyer purchases could be set to rise again.

e.surv, which makes its forecasts from its own surveying and valuation data and reckons to be within 1% of official statistics, estimates that there were 46,499 loans for house purchase in February.  

In January, house purchase approvals reached a two-year high of 58,728, boosted by a glut of new buyers trying to complete before the end of the tax break on March 24.

e.surv said that by contrast, in February first-time buyer numbers fell to their lowest level since last July, indicating that the first-timer market looks set to enter a trough following artificially strong months in December and January.

Loans for purchases under £250,000, the threshold for the Stamp Duty exemption (and also typical first-timer property), fell by almost 10,000, from 43,459 in January to 33,944 in February.

There were further signs of underlying weakness afflicting the market in February, reports e.surv.

It forecasts the average loan-to-value (LTV) fell for the third consecutive month to 61%. Loans to borrowers with small deposits of under 15% fell to their lowest since July 2011. There were only 5,533 such loans in February, down from 7,870 in January, reflecting the decline in first-time buyer numbers, but also the greater unwillingness of lenders to grant loans to lower-income borrowers.

The sharp decline in first-time buyers dragged the total number of house purchase approvals down to their lowest level since last May. It is the first time monthly approvals have fallen since September.

Richard Sexton, director of e.surv, said: “The stampede of first-time buyers rushing to beat the Stamp Duty deadline bloated the January figures out of all recognition. At first glance the drop in approvals during February looks alarming, but it is a return to normality after an abnormally frantic winter.”