Home loans fell 8% in June to their lowest level since May 2011 as banks reduced lending to first-time homebuyers with small deposits. Banks tightened lending criteria in response to increased funding costs and eurozone fears, approving just 4,750 loans to borrowers with deposits under 15%. The average deposit on home purchases rose above 40% for the first time since 2011 as higher interest rates and tighter standards reversed recent growth in lending. A significant recovery in the mortgage market is unlikely without cheaper funding from the government's Funding for Lending scheme to boost lending to lower-income buyers.

1. UNDER EMBARGO UNTIL 00:01 HRS FRIDAY 13TH JULY 2012
HOME LOANS SLIP 8% IN JUNE AS BANKS REDUCE LENDING TO FIRST TIME HOMEBUYERS
 Loans for first time buyers fall 12% as banks reduce lending to borrowers with small deposits
 Banks tighten lending criteria in response to their increased funding costs and eurozone fears
 Home loans fall to lowest since May last year; 4% lower than June last year
 Just 4,750 loans to borrowers with deposit of under 15% - lowest since October 2011
 Hopes turn to government’s Funding For Lending scheme to help kick-start market
Loans for house purchase dropped sharply by 8% in June to 46,932 – the lowest since May last year – as banks
scaled back their lending to first-time homebuyers, according to the latest Mortgage Monitor from e.surv chartered
surveyors. Banks tightened their lending conditions in June and reduced the number of loans to buyers with small
deposits in a calculated reaction to their increased funding costs and fears over the eurozone.
First time buyer numbers fell steeply as a result of the tightening lending conditions. There were just 10,325 loans
for house purchases under £125,000 (typical first-time buyer property), a fall of 12% from May. Purchase approvals
on typical first-timer homes were also marginally lower than in June last year, despite 2011 being a weak year for
lending.
The tighter lending conditions were reflected in a sharp fall in loans to borrowers with small deposits. First time
buyers were the hardest hit. The number of loans to borrowers with a deposit of under 15% fell sharply from 5,510
in May to 4,750 in June - the lowest since last October. Just one in ten house purchase loans in June were to
borrowers with a deposit of less than 15% - the lowest ratio for 11 months – as banks focus on sustaining lending
to wealthier borrowers.
MORTGAGE APPROVALS (for home
purchases) - MONTHLY CHANGE House purchase loans were 4% lower than in June last year –
15%
10%
the first year-on-year fall for 13 months – signalling the
5% mortgage market is regressing as the economy stalls and credit
0% conditions tighten.
-5%
-10% e.surv June The average deposit on a house purchase loan rose above 40%
forecast
-15%
for the first time since February 2011. Rising rates and tighter
-20%
lending conditions have reversed the tentative growth in the
-25%
number of loans (and high LTV lending) since last autumn. The
Jun-09
Dec-09
Mar-10
Jun-10
Dec-10
Mar-11
Jun-11
Dec-11
Mar-12
Jun-12
Sep-09
Sep-10
Sep-11

2. drop in lending reflects the findings of the Bank of England’s Q2 survey of credit conditions, which reported a fall in
banks’ mortgage credit and a reduction in high loan-to-value lending over the summer.
LTV RATIO (for home purchases) Richard Sexton, business development director of e.surv,
0.70
explains: “The mortgage market is slipping back into a state
0.65 of paralysis. Banks are shipping their increased costs onto
borrowers like a hot potato. It costs banks up to 40% more to
0.60
fund a mortgage than it did in February, which is squeezing
0.55 their balance sheets like a vice. They’ve responded by upping
rates and reducing the number of mortgages they grant. First
0.50
time buyers have been hardest hit because they have smaller
0.45 deposits, so are seen by banks as riskier borrowers. While
Jun-07
Nov-07
Feb-09
Jul-09
Dec-09
May-10
Oct-10
Mar-11
Jan-12
Jun-12
Sep-08
Apr-08
Aug-11
credit is so scarce, banks would rather focus on sustaining
lending to wealthier borrowers and buy-to-let landlords.
A significant improvement in mortgage lending looks a long way off. The economy is congealing rapidly while the
government struggles to find a recipe for growth. On top of that, the uncertainty in the eurozone will weigh heavily
on the mortgage market over the coming months. The crisis has spooked the wholesale money markets – they see
banks with exposure to the eurozone as an increasingly risky investment. Banks are diverting funds earmarked for
new lending and using them to plug gaps in their balance sheets that could be breached by a serious shockwave
from the eurozone.
The government’s Funding for Lending scheme can’t come into effect soon enough. Banks need access to cheaper
funds if they are to increase lending to lower income buyers. Funding for Lending will help, but it may not be on a
large enough scale to make any serious inroads into helping would-be buyers escape the rental market.”
LOANS FOR HOUSE PURCHASE (seasonally adjusted)
Month Number Monthly change Annual change
Dec 52,939 0.6% 24.7%
Jan 58,728 7.0% 30.0%
Feb 49,778 -15.0% 7.0%
Mar 51,067 3.0% 9.0%
April 51,823 2.0% 12.0%
May 51,098 -1.0% 9.8%
e.surv June forecast 46,932 -8.2% -3.9%
- Ends -
Methodology

3. e.surv analyses detailed data on over one million mortgage valuations the firm carried out between August 2006
and today. Each month, the researchers analyse tens of thousands of valuations and use these trends to
extrapolate from the Bank of England’s mortgage data to publish mortgage approval numbers for the whole of the
UK, weeks before the BBA, CML and Bank of England. The average margin of error over the last six months is
1.2% compared to the Bank of England final purchase approval data. In January e.surv forecast 58,610 purchase
approvals, only fractionally out from the 58,728 published by the Bank of England later in the month.
Notes to Editors
About e.surv
e.surv is a firm of chartered surveyors, directly employing over 350 chartered surveyors and a similar number of
consultants. The business is the largest distributor and manager of valuation instructions in the UK and is
appointed as panel manager for more than 25 mortgage lenders and other entities with interests in residential
property. The business also provides a number of private survey products direct to the home-buying public. e.surv
is owned by LSL Property Services plc. For further information, see www.lslps.co.uk
Press contacts
Adam Jones, The Wriglesworth Consultancy
a.jones@wriglesworth.com, 020 7427 1403
Monica Daniel, marketing manager, Surveying and Corporate Services
monica.daniel@lslps.com 01392 355555
The Mortgage Monitor is prepared by The Wriglesworth Consultancy for e.surv. The copyright and all other
intellectual property rights in the Mortgage Monitor belong to e.surv. Reproduction in whole or part is not permitted
unless an acknowledgement to e.surv as the source is included. No modification is permitted without e.surv’s prior
written consent.
Whilst care is taken in the compilation of the Report no representation or assurances are made as to its accuracy
or completeness. e.surv reserves the right to vary the methodology and to edit or discontinue the Report in whole
or in part at anytime.