Mortgage lending slips to five-month low
The number of mortgage approvals in the UK fell to a five-month low in February, according to new figures from the Bank of England.
There were 51,653 loan approvals to a tune of £7.7 billion in February, compared to 54,187 in January and down again from the average of 52,395 over the previous six months.
Brian Murphy, head of lending at the Mortgage Advice Bureau, said: "The fact that overall mortgage approvals slipped again - with house purchase approvals down for the second successive month - shows how important it is to encourage more activity in this area.
"It is vital the Treasury and Bank of England keep homebuyers firmly in mind if they extend or adjust the Funding for Lending Scheme, rather than switching their attention to small businesses."
He added the government's Help to Buy scheme should encourage the market but warned the January 2014 launch of the mortgage guarantee scheme could see the market stagnate until then as buyers wait.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said: "If it is implemented effectively, the new Help To Buy mortgage guarantee will encourage higher loan to value (LTV) lending, but there are eight long months before this comes into play and there are lots of operational details still to settle.
"Expanding the First Buy equity loan scheme to all new homebuyers in the meantime will certainly help to boost the number of mortgage approvals.
"But with new build homes in short supply, we must hope that it also encourages house builders to increase output to meet the extra demand."
Loan to value
The LTV shows how much of a property is being financed and is also a way to tell how much equity you have in a property. The higher the LTV ratio the greater the risk for the lender, so borrowers with small deposits or not much equity in the property will be charged higher interest rates than borrowers with large deposits. The LTV ratio is calculated by dividing the loan value by the property value and then multiplying by 100. For example, a £140,000 loan on a £200,000 property is a LTV of 70%.