Mortgage approvals hit four-year high, valuers predict

Mortgage approvals are predicted to have hit a four-year high in January.

The forecast comes from national surveying firm e.surv, part of LSL, and follows a similarly upbeat report from another valuations firm, Connells. The prediction also seems in tune with this morning’s RICS housing market survey which said housing transactions across the UK are growing.The e.surv prediction is based on its own workload and is for 65,194 mortgage approvals last month. If correct, January will have been the best month since the 2008 financial crisis.

It will also have marked a 13% improvement on January last year.

E.surv says the improvement in lending was driven by high LTV borrowers and first-time buyers, who accounted for the biggest overall share of the increase.

There were 7,758 loans to borrowers with a deposit of 15% or lower in January – the highest since February 2008. There were 14,995 loans on properties worth less than £125,000 in January (a typical first-time buyer property), the highest since February 2008 and a 28% increase from 11,714 in December.

The number of loans on more expensive property increased at a much slower rate, illustrating how the improvement in lending in January was focused mainly on first-time buyers.

According to e.surv, the Bank of England’s Funding for Lending Scheme is the root cause of the improvement in lending conditions.

Richard Sexton, business development director of e.surv chartered surveyors, said: “These are the most encouraging signs for the mortgage market since the financial crisis. After an inauspicious start last autumn, Funding for Lending has come good.

“It has flooded lenders’ balance sheets with cheaper funds, which has encouraged them to reduce mortgage rates to record lows and roll out a much wider range of mortgages for high loan-to-value borrowers. It is helping clear the logjam in the first-time buyer market.

“The hope now is that January isn’t just a flash in the pan. There are plenty of reasons to believe it won’t be. Funding is cheaper. Borrower finances are better. And the Eurozone crisis lies dormant.

“All of this bodes well for the rest of the year. Lenders are more confident, and have been emboldened by Funding for Lending and by the relaxation of the speed at which they have to construct capital buffers.

“Much will hinge on the economy. If it slides into a triple dip recession, lots of the confidence which has been built up over the last few months will evaporate and the recovery will go up in smoke.

“There are also concerns over the government’s plan to electrify the ring fence between retail and investment banking. The voltage from this could shock lenders into focusing their efforts on restructuring their businesses, rather than on where it is needed: on new lending.”