Mortgage market holds during October

Mortgage market continues recent strong performance
North West is once again small deposit hotspot
Survey covers last full month before base rate rise

The number of mortgage approvals remained level between September and October, dropping back slightly compared to the same point a year ago.

The latest Mortgage Monitor from e.surv, one of the UK’s largest residential chartered surveyors, recorded 66,136 mortgage approvals (seasonally adjusted) this month.

This figure was flat compared to September, when 66,185 loans were approved, but down 1.5% compared to October 2016.

Despite the market remaining flat month-on-month, the proportion of buyers with smaller deposits getting loans dropped again this month.

Some 17.7% of all loans were went to this part of the market in October, down from 19.8% a month ago and 20.3% in August.

However, this month’s figure is still above the most recent low point – in December 2016 – when small deposit borrowers made up just 16.1% of the market.

Richard Sexton, a Director of e.surv Chartered Surveyors, comments:

“The mortgage market performed above expectations all summer, so for this to continue well into the autumn is good news for would-be borrowers.

“However, the drop off in small deposit borrowers – which includes many first-time buyers – should also be noted. This once again highlights the fact more should be done to help young borrowers get onto the ladder.”

Borrowers move to secure low rates

As the number of smaller deposit buyers dropped, this gap has been filled by those with large deposits – defined as those with a deposit of 60% or more.

This group of borrowers had a higher proportion of the market in October than in any month so far this year. This month 36.5% of all loans went to this segment of the market, well ahead of the 35% found in September.

The proportion of mid-market borrowers also increased this month, growing from 45.2% in September to 45.8% in this survey.

On an absolute basis, the number of small deposit buyers fell significantly in October. A total of 11,706 mortgage were completed by these borrowers this month, well down on the 13,105 recorded in September.

Richard Sexton, a Director of e.surv Chartered Surveyors, comments:

“This survey covers the last month before the Bank of England raised the base rate, so the spike in mortgage approvals for large deposit buyers is likely to be these borrowers sealing a low rate while they can.

“With the period of historically low mortgage rates appears to be ending, many homeowners have remortgaged to lock in a good deal. This has meant smaller borrowers have been squeezed out, but hopefully this just a temporary market shift.”

Small deposit borrowers succeed in northern areas

Northern regions of England and Northern Ireland continue to offer the best chance for first-time buyers to get onto the ladder, and for other small deposit buyers to get finance.

The North West had a higher proportion of these borrowers than any other region during October – the second successive month it has topped the chart. Some 27.5% of all loans went to small deposit buyers in the North West this month. It was the only area to see more loans approved to small deposit buyers than large ones.

This put it ahead of Northern Ireland – where 26.3% of mortgage approvals were to smaller deposit buyers – and Yorkshire, where the figure was 25.9%.

These were the only three areas to see more than a quarter of loans go to this part of the market.

The struggles experienced by buyers in the south of England were demonstrated by the fact almost 8% of approvals in London went to small deposit buyers. In the South East the ratio was 13%.

Both these markets were both by borrowers with large amounts of equity. In London 44% of the market was occupied by those with big deposits, closely followed by the South East where the ratio was 43.2%.

The South and South Wales region was the other area of the UK to have more than 40% of loan approvals go to large deposit buyers. It recorded 40.9% during October.

Richard Sexton, a Director of e.surv, concludes:

“The north-south divide continues to be demonstrated by these figures. If you’re a first-time buyer, you are far more likely to have success in northern areas than you are in London and the surrounding regions.

“The North West continues to be the small deposit hotspot, and is the only region where more loan approvals went to small deposit buyers than their large deposit counterparts.

“Close behind, Northern Ireland and Yorkshire once again demonstrated that they are a great location for people to get onto the ladder for the first time.”

Data source: e.surv Chartered Surveyors

Data from: October 2017