Mortgage approvals enjoy summer boost

• Number of mortgages approved up compared to June
• London market continues to be dominated by those with large deposits
• Other regions offer fertile ground for first-time buyers

As temperatures soared across the country, the UK mortgage market also continued to heat up, with the number of mortgage approvals increasing once again.

The latest Mortgage Monitor from e.surv, one of the UK’s largest residential chartered surveyors, found that there were 66,590 mortgages approved during July (seasonally adjusted).

These approval figures are 1.5% higher than in June, which itself was much higher than May and April.

While in recent months first-time buyers have been among the main beneficiaries of the overall market growth, these borrowers saw their share of their market decline slightly compared to last month.

Small deposit borrowers represented 22.1% of the mortgage market in July, down on the 23.4% recorded in June.

However, the overarching trend has seen small deposit borrowers taking an increasing share of the market over time, perhaps buoyed by the range of government and first-time buyer support schemes.

The effect of the Bank of England’s decision to increase the base rate to 0.75% on August 2nd – its highest level in almost a decade – will be felt in future surveys.

Base rate increases, and the speculation which surrounds such decisions, often tempts existing homeowners into the remortgage market.

Richard Sexton, Director at e.surv, comments:

“It is often thought that good weather causes a slowdown in the UK housing market, as would-be home buyers prefer to spend their time enjoying the sun.

“That thesis has been disproved this month, as the number of mortgage approvals increased month-on-month, despite the scorching weather across most of the UK.

“Looking ahead to future months, the decision to increase the base rate to the highest level since February 2009 will be of interest across the market.

“Many homeowners will look to remortgage immediately while others are likely to take action in September when they receive their new, higher bills.”

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

Large deposit borrowers grow market share once more

There was an increase in the proportion of new mortgages being given to large deposit borrowers – defined by this survey as having a deposit of 60% or more – this month.

This type of borrower made up 33.8% of the overall mortgage market in June, up compared to the 32.9% recorded last month.

Small deposit borrowers saw their share of the market fall from 23.4% to 22.1% between June and July.

Given these changes in the last month, mid-market borrowers saw their market share stay broadly the same compared to a month ago.

This category represented 44.1% of the total market this month compared to 43.7% in June.

Despite the growth in the overall mortgage market, the absolute number of small deposit borrowers getting finance declined this month.

This survey recorded 14,716 loans to these borrowers in July, versus 15,546 in June.

Richard Sexton, Director at e.surv, comments:

“Those with more cash to splash took a bigger share of the mortgage market this month, yet there are still great opportunities for small deposit borrowers to get onto the ladder.

Proportion of large deposit loans by region

London market dominated by those with large deposits

London continued to be dominated by buyers with large deposits, with more than 40% of all new loans in the city going to this segment of the market during July.

In the capital, 42.1% of all loans were to those with a large deposit, higher than anywhere else in the UK.

Additionally, just 11.4% of all mortgages in the capital went to those with small deposits, showing the difficulties first-time buyers have purchasing a property in the city.

There was better news elsewhere in the country for young buyers.

Of all the UK regions and nations, Northern Ireland saw the biggest percentage market share for small deposit borrowers, with 32.3% of all loans going to this part of the market.

Close behind was Yorkshire, where 32.1% of all mortgage approvals were to borrowers with small deposits.

The North West was the only region to see more loans go to those with small deposits than their large deposit counterparts – 30.9% versus 25.5%.

At the other end of the scale, London was the area with the lowest percentage of first-time buyers and others with small deposits.

Other areas to post low percentage figures were the South East, which saw small deposit borrowers take a 16% market share, and the South and South Wales, where this figure was 20.3%.

Proportion of small deposit loans by region

Richard Sexton, Director at e.surv, concludes:

“While many look at the UK property market as a whole, it really is better viewed as a series of local markets, often with wildly differing characteristics.

“The London market is once again dominated by those with large deposits or high levels of equity in their existing home, while the North West has more first-time buyers and small deposit borrowers.

“In general, those areas closest to London require more sizeable deposits for borrowers to get onto the ladder while northern areas often see a greater number of first-time buyers.”

Data source: e.surv Chartered Surveyors

Date from: July 2018