Activity in the UK £500,000 plus mortgage market has grown by 162% year on year, a new report shows. The dramatic increase reflects the fact that depressed conditions prevailed in the first half of 2009 but more recent trends indicate that the growth in the market is continuing, says the latest prime mortgage market briefing from Knight Frank.
There was a 26% rise in £500,000 plus completions in the three months to May. But the general election had an impact on activity during the early part of the mortgage process with the number of offers declining by around 39% in May compared to three months earlier, the report also shows.
But while the prime mortgage market is undoubtedly much healthier than it was a year ago, there is growing evidence that lenders are being more discerning in terms of which applicants they will make offers to. ‘After a long period of steady decline the average LTV for £500,000 plus mortgages rose in May for the second month in a row to hit 68%, up from 53% in March, lenders are widening their spread of products on the market, despite this uplift in average LTV the market at this level is still being driven by equity rich purchasers,’ said Simon Gammon, head of Knight Frank Finance.
‘Average rates on newly agreed mortgages have moved up slightly over the past month, from 3.27% to 3.40%, but are still lower than average rates last May of 3.96%. The rise in average rates is related to the trend towards higher LTV products. Borrowers are increasingly looking at fixed rate deals with concerns from many to secure deals before rates rise,’ he explained.
He also said that activity at the £1 million plus level of the market is increasingly being driven by new entrants into the market. Middle East and Asian banks are now increasingly active in the UK market and are targeting this end of the market. ‘Private banks are again back in force and are widening their range of products at the 80% and 85% level with significant improvements in the level at which they are prepared to lend at,’ said Gammon.
‘The range of borrowers we are seeing is increasing with a growing number of Russian, European, US and Asian borrowers in the market,’ he added.