Lending for house purchase slumped for the second successive month in October, it has been forecast.
Valuers e-surv say that house purchase approvals fell from 50,967 in September to 50,382 in October, a 1.1% decline. It said that first-time buyers and those with smaller deposits were hit worst.
The business, which is part of the LSL group, makes its monthly forecasts based on its own data, and claims to be within 1% of official figures when they are published.
The firm says that although house purchase mortgage approvals rose 6.7% year-on-year in October, the same month in 2010 was a weak comparator.
The latest month-on-month fall was triggered by the tightest lending conditions seen since February.
The average deposit size was 40% in October, with lower income buyers struggling to meet criteria for high LTV products. Loans with a deposit of 15% or under accounted for less than one tenth of all lending in October, compared to almost a quarter in 2007.
e-surve said that lenders are targeting low LTV borrowers because of their fears over restricted credit conditions and the protracted crisis in the eurozone.
This has sparked a fall in the number of lower income buyers, with purchase approvals falling fastest in the cheapest property brackets.
Loans for purchases below £250,000 fell from 36,187 in September to 35,772 in October.
Loans with a deposit of 10% or under – a typical deposit size for first-time buyers – accounted for just 1% of total lending for house purchases in October. By way of contrast, this figure was 13% in October 2007.
The overall decline was cushioned by consistent activity in the wealthier price brackets. The number of loans for properties over £375,000 remained stable.
As a result, these wealthier buyers continue to represent a disproportionate share of the market.
October’s figures confirmed the reversal of the positive summer trend of higher LTV lending and increasing numbers of first-time buyers.
They also help justify the latest Credit Conditions Survey from the Bank of England, which said a sustained period of tight funding conditions would prevent lenders from growing their loan books in Q4 2011.
Richard Sexton, director of e.surv, said: “With perhaps the notable exception of buy-to-let lending, lenders are in no position to begin growing their loan books in the current climate, although noises coming from some sections of the market would have you believe otherwise.
“Credit conditions are sclerotic, and banks are under intense pressure.
“Banks are becoming more cautious, having upped their high LTV lending over the summer in a bid to increase their market share. They are now focusing on wealthier borrowers.
“It looks like they are still pushing high LTV mortgages, but the truth is, the criteria are so strict, most first-time buyers aren’t eligible.”
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