The latest release of the e.surv mortgage monitor is now out; the March 2012 mortgage monitor reports a reduction in the number of mortgage approvals for home purchases. Mortgage approvals for home purchases dropped to 43,450, which is the lowest level since December 2010 and 7% lower than March 2011.
The monitor reports that tighter credit conditions and increased funding costs have forced banks to scale back lending, and there has been a drop in lending to borrowers with small deposits. March 2012 was the fourth consecutive month in which lending to borrowers with small deposits has declined.
Richard Sexton, director of e.surv, said: "Up until now high-street mortgage lenders have been able to absorb steadily increasing costs, rather than passing them onto the consumer. The tactic boosted activity during last autumn and early part of this year, albeit artificially, and veiled a multitude of underlying weaknesses in the market. Now that the banks can no longer afford to take on extra costs, those weaknesses are beginning to come to bear once again."
"A challenging period lies ahead – particularly for buyers on low incomes and with small deposits. Mortgage lenders’ balance sheets are groaning under the weight of increased funding costs. In the Bank of England’s latest survey of credit conditions, the banks reported a fall in mortgage credit for the first time since spring 2010. As a result, banks are tightening their criteria and putting up rates on some of their mortgages."
"Mortgage availability will continue to fall in the next three months, and banks have admitted borrowers with small deposits will be hit the hardest. This has already begun to happen, with markedly fewer loans in March to first time buyers and a sharp drop in high loan-to-value lending."