First-time buyers take advantage in October

• Growth in number of approvals to small deposit borrowers
• Four regions are dominated by these buyers
• Overall market up compared to last month

First-time buyers and existing homeowners capitalised on low rates across the market in October.

The latest Mortgage Monitor from e.surv, the UK’s largest residential chartered surveyors, found that there were 67,011 mortgages approved during the month of October (seasonally adjusted).

This figure is 2.7% higher than September’s approval figure and is also up on the previous October. Approvals were 3.5% above the level found in the same month a year ago.

Despite the Bank of England base rate being raised at the start of August, mortgage rates have remained comparatively cheap, tempting more borrowers into the market.

First-time buyers have also continued to come to market, taking a larger share of mortgage approvals than a month ago.

Some 24.6% of all loans went to borrowers with smaller deposits this month, higher than the 24.2% recorded in September.

Transactions are likely to tail off as the year comes to a close, as buyers prefer not to move close to the Christmas period.

However, those existing homeowners looking to remortgage may swoop to grab a cheap mortgage deal while they last, given rates have ticked up since the base rate rise occurred in August.

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

“Most agree there appears to be little prospect of another increase in the Bank of England’s base rate between now and the end of the year, yet that is no reason for potential remortgage customers to halt their search.

“With rates still at historically low levels across the board, there are great deals to be found at both high street mortgage lenders and more specialist banks.

“Homeowners should chat to a mortgage broker to see what deals are available to them, and capitalise while mortgage loans are still available with cheap rates.”

Monthly number of total sterling approvals for house purchases (seasonally adjusted):

Small deposit borrowers continue to increase market share

The mortgage market continued its recent shift towards buyers with smaller deposits, with an increase in lending to this group in October.

Some 24.6% of all loans went to this segment of the market in the month, higher than the 24.2% recorded in September.

This continues the recent trend away from large deposit buyers.

In October, 29.6% of all loans went to borrowers with large deposits, defined by this survey as borrowers with a deposit of 60% or more.

This figure is lower than the 30% market share recorded a month ago.

It is also lower than the 32.5% recorded in August and even further from the 33.8% seen in July.

On an absolute basis, the number of small deposit borrowers grew from 16,142 to 16,485.

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

“Borrowers with smaller deposits, including many first-time buyers, saw their market share increase this month.

“This continues the broader market trend towards these borrowers and away from those with larger amounts of cash.”

Proportion of large deposit loans by region:

Regions also show fall in large deposit borrowers

Four regions recorded a greater number of loans to small deposit borrowers than their large deposit counterparts this month.

Yorkshire was the area with the highest market share for small deposit borrowers, recording 33.7% this month. This compared to just 21.1% for large deposit borrowers.

Elsewhere, the North West saw 31.2% of loans go to small deposit borrowers versus 23.3% for those with large deposits while in Northern Ireland this was 29.5% against 24.7%.

The final region to follow suit was the Midlands, where 27.1% of loans went to small deposit borrowers compared to 25.7% for those with large deposits.

As usual, London was the part of the country most dominated by those with larger deposits, even though the proportion dipped below 40%.

In the capital, 39.8% of all loans went to those with large deposits, versus just 14.7% for those with smaller cash piles.

The next biggest region for those with large deposits was the South East, where 34.7% of all loans went to this part of the market. This was followed by the South and South Wales, where the figure was 31.8%.

In each of these two regions, the proportion of loans to small deposit buyers was less than 25%.

The other areas in the same situation were the East Midlands and Scotland.

Proportion of small deposit loans by region:

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

“Whilst a decline in purchase activity in general has been evident since the summer, first-time buyers and others with smaller deposits will be delighted to see similar buyers dominating the market across many UK regions.

“Those in Northern Ireland, Yorkshire, the North West and the Midlands are all operating in a fertile market for small deposit borrowers.

“Even those people looking to buy in other regions have a better chance of obtaining finance and getting on the ladder than previously, as the country-wide picture moves away from those with large deposits.”

Data source: e.surv Chartered Surveyors

Data from: October 2018