Mortgage approvals rise in February

• Slowdown in the housing market not yet reflected in mortgage approval 
• Larger number of new mortgages generate than a year ago
• London market remains most difficult for first-time buyers

The mortgage market continued its positive start to the year, with the number of loans approved rising strongly compared to 12 months ago.

The latest Mortgage Monitor from e.surv, the UK’s largest provider of residential surveying and property risk services, found that there were 66,465 mortgages approved during February 2019 (seasonally adjusted).

This follows a positive January and suggests that the current lack of confidence in the housing market has not filtered through to the mortgage market.

Approvals were 3.8% higher than a year ago, the survey found, although they did drop down 0.5% compared to a month ago.

The proportion of loans going to small deposit buyers, typically first-timers, fell back slightly.

However, the market outlook remains generally positive for this group of borrowers.

Some 26.3% of all loans went to this segment of the market, down on the 27.1% recorded in January’s survey.

As in recent months, remortgage activity has been a large driver of the market, with many borrowers looking to seal a cheap mortgage.

Many lenders have cut rates to try and tempt borrowers to market.

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

“While confidence has fallen in the housing market due to economic and political turbulence, the mortgage market continues to grow.

“Existing homeowners are able to lock into cheap fixed rate deals while first-time buyers are being helped by more generous criteria being offered by banks and building societies.

“Raising a deposit remains a challenge for young borrowers, but there are more products being launched which are targeting those with little cash to spare.”

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

Shift towards mid-market borrowers in February

The number of mortgages being taken out by borrowers with large deposits fell once again this month.

Just 26.9% of all loans were to this part of the market during February. This is lower than the 28.1% recorded last month and further back from the 30.1% seen in December.

Given there was also a fall in the proportion of small deposit borrowers, from 27.1% of the market to 26.3%, it was the mid-market customers who enjoyed a far greater share of the market in February.

The proportion of mid-market borrowers increased substantially, growing from 44.8% to 46.8% month-on-month.

On an absolute basis, the number of small deposit borrowers fell slightly, from 17,981 to 17,480 between January and February.

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

“We have seen a shift in the market this month, with mid-market borrowers occupying a greater share than for some time.

“This growth is driven by the excellent remortgage deals available, which are tempting everyday borrowers to enter the market.”

Proportion of large deposit loans by region:

Yorkshire proves most attractive to young buyers

Homeowners with small deposits occupied more than a third of the market in Yorkshire this month, with 34.1% of all loans going to these borrowers.

This was a further month at the top of the charts for the region, having also topped the leaderboard in January.

Northern Ireland was the next most attractive area for first-time buyers and others with small deposits. Some 31.9% of all loans went to these mortgage applicants in February.

The North West rounded out the top three, at 31.4% this month. All other regions recorded a ratio of less than 30%.

Small deposit mortgage applicants faced the most difficulty in London. Just 15.4% of loans were given to these customers in February, down on the 17.3% recorded last month.

Large deposit mortgages continued to dominate the market in the capital, representing 36.8% of all loans.

Close behind was the South East, which scored 31.8%, and then the South and South Wales on 28.8%.

As was the case last month, the North West, Northern Ireland, the Midlands and Yorkshire were the four regions which saw a higher proportion of mortgages go to small deposit borrowers than those with large deposits.

Proportion of small deposit loans by region:

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

“The slowdown in house price rises in London has been a welcome relief for first-time buyers, as properties slowly become more affordable.

“However, those looking to buy in the capital city still have a significantly harder job than those in other regions, given prices are still very high.

“If borrowers have the ability to work from anywhere, affordability is much better in northern areas and Northern Ireland.”

Data source: e.surv Chartered Surveyors

Data from: Feb 2018