Base rate boost for mortgage market

Market grows between October and November after interest rate rise

Approvals increase 2.5% month-on-month as borrowers move to lock in low rates

Data covers first month of Bank of England base rate increase

There were encouraging signs in the mortgage market as the number of approvals increased between October and November, following an increase in the base rate.

The latest Mortgage Monitor from e.surv, one of the UK’s largest residential chartered surveyors, recorded 66,167 mortgage approvals (seasonally adjusted) this month.

This suggests the increase in the Bank of England base rate has prompted many homeowners to switch from variable rate deals to fixed rate products.

The approvals figure is up 2.5% on October’s total, although it is 1% down compared to the same month a year ago.

However, despite this month-on-month growth, the number of borrowers with small deposits being approved continues to decline.

Across the UK 17.2% of all loans went to these borrowers, continuing a recent downward trend.

Last month 17.7% of approvals were made to small deposit borrowers and November’s figure is even further back from the 19.8% recorded in September and 20.3% in August.

However, this month’s percentage is ahead of the most recent low point – December 2016 – when small deposit borrowers represented just 16.1% of the overall market.

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

“After months of speculation, the Bank of England base rate increased to 0.5%, and this has prompted many people to switch their mortgage and lock in a low rate.

“Overall approvals have increased month-on-month, and we expect this to continue as those on variable rate mortgages see their monthly payments increase. Many will be able to switch elsewhere and save.”

Mid-market borrowers continue to dominate but remain flat

Although the proportion of small deposit buyers has fallen once again this month, there was no increase in the market share of those with large deposits.

Some 36.5% of all approvals went to those with large deposits – defined by this survey as those with a deposit of 60% or more. This is the same proportion as last month.

This meant there was a boost to mid-market borrowers, with this group occupying 46.3% of the market this month compared to 45.8% in October.

While the size of the market increased compared to last month, the number of small deposit buyers fell once again. There were 11,381 small deposit approvals made during November 2017, lower than the 11,706 mortgage recorded last month and even further back from the 13,105 recorded in September.

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

“While the mortgage market as a whole has continued its impressive recent performance, there are concerns about first-time buyers and those with small deposits being squeezed.

“Their share of the market continues to fall, which shows how important it is for lenders, government and builders to do more to support buyers struggling to get onto the ladder.”

Yorkshire provides fertile ground for borrowers

Yorkshire offered the best chance for first-time buyers and other people with small deposits to get onto the property ladder this month. More than a quarter (26.3%) of all loans went to this part of the market during November, a higher proportion than any other region.

Yorkshire was one of only two regions to see more or an equal proportion of loans go to small borrowers than their larger deposit counterparts, the other being the North West.

In the North West 25.7% of loans went to this segment versus 25% to large deposit borrowers while in Yorkshire the ratio was 26.3% for both.

London continued to be the market most dominated by large deposit buyers. This month 41.6% of all loans went to these borrowers, a higher proportion than anywhere else. By comparison, just 15.2% went to those with smaller deposits.

The picture was similar in the South East, where 41.2% of loans went to larger buyers compared to 17% with smaller pots of cash.

This continued the long-standing trend of better affordability for buyers in the north of England over southern regions.

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

 “Once again we are seeing northern areas providing the best markets for first-time buyers to purchase their first home.

“Yorkshire, with big cities such as Leeds and Sheffield as well as smaller towns and villages in rural areas, is proving increasingly attractive to first-time buyers as low prices make it easier to get onto the ladder.

“By contrast, London’s harsh property market means it is more difficult to buy a home in the capital than anywhere else in the UK.”

Data source: e.surv Chartered Surveyors

Data from: November 2017