Mortgage market springs forward in May

• Strong growth in mortgage approvals compared to April
• Small deposit buyers dominate Northern Ireland market
• Increase in proportion of loans to these borrowers

The UK mortgage market boasted substantial growth between April and May, with first-time buyers among the main beneficiaries.

The latest Mortgage Monitor from e.surv, the UK’s largest residential chartered surveyors, shows there was a sharp increase in mortgage approvals this month.

A total of 66,479 mortgages (seasonally adjusted) were approved in May, 6.4% higher than April’s figure.

First-time buyers and others with small deposits saw their share of the market increase month-on-month.

Some 22.4% of the overall market went to these borrowers during May, significantly higher than the 20.2% rate found in April.

As ever, there is a wide variation between the regions of the UK, with some areas boasting a much higher proportion of small deposit borrowers.

In Northern Ireland 35.7% of all loans went to this part of the market while in London this ratio was 13.8%.

As well as growing compared to last month, the UK mortgage market also grew compared to May 2017. There were 0.5% more loans approved this month than a year ago.

Activity may have been boosted by the rumours that the Bank of England would increase the base rate in May.

While the central bank later chose not to increase the base rate, the speculation may have prompted some people to consider the mortgage options and lock in a low mortgage rate.

The next base rate decision will be made at the end of June.

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

“There was strong growth in the mortgage market in May, with approvals rising significantly compared to April.

“Mortgages are at the forefront of the national conversation, with many people assessing their options and looking to fix in this rising interest rate environment.

“While the base rate may have stayed at 0.5% in May, speculation continues about the next increase, which appears to be coming sooner rather than later.”

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

Fall in proportion of large deposit borrowers

Large deposit borrowers – defined by as having a deposit of 60% or more – were squeezed once again this month.

The proportion of loans given to this part of the market dropped compared to last month. In May 32.8% of all loans went to these borrowers compared to 33.2% last month.

This is also lower than 2018’s high of 34.5%, recorded in March.

Mid-market borrowers also saw their share of the market drop, falling from 46.6% last month to 44.8% today.

On an absolute basis, there was a significant increase in the number of small deposit buyers this month, thanks to the increased overall market and these borrowers taking a greater share of that market.

Some 14,891 loans were approved to these borrowers in May, compared to 13,429 last month.

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

“We have seen a sharp increase in the number of small deposit borrowers this month, which will be a big confidence boost to others looking to get on the ladder soon.

“This is the second successive month we have seen a large rise, suggesting now is a great time if you have a small deposit.”

Proportion of large deposit loans by region:

40% of mortgages in capital go to wealthiest borrowers

This month 40% of all mortgages approved in London were to borrowers with large amounts of equity in their property, or a large deposit to put down.

The capital was the area of the UK with the highest proportion of buyers with large deposits.

Close behind was the South East, where 38.2% of loans went to this part of the market, and then Eastern England – where the figure was 35.7%.

By contrast, those with smaller deposits found the going difficult in London. Just 13.8% of loans in the capital went to these borrowers, significantly lower than all other regions.

The closest to this figure was the South East, which recorded a ratio of 18.9%. Next was Eastern England and South and South Wales regions, where this figure was 20.8%.

For the second month running Northern Ireland saw a bigger proportion of loans go to small deposit borrowers than anywhere else, as 35.7% of all loans went to this part of the market.

The region was one of only four to have a greater proportion of small deposit buyers than their large deposit counterparts.

The others were Yorkshire, the North West and the Midlands.

In Yorkshire 32.6% of loans went to small deposit borrowers versus 24% for large ones.

In the North West these ratios were 32.1% versus 23.5% in favour of those with small deposits.

In the Midlands these figures were 27.4% for small deposit borrowers compared with 27.2%.

Proportion of small deposit loans by region:

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

“London continues to be split between the haves and the have nots. Those with large amounts of cash – whether that is in the form of equity in their existing home or a large mortgage deposit – continue to dominate in the capital.

“By contrast, those with small amounts of cash saved find it increasingly difficult to get a foothold in the capital’s property market.

“Elsewhere, the markets in Northern Ireland, the North West, the Midlands and Yorkshire are the only ones tilted in favour of small deposit borrowers.”

Data source: e.surv Chartered Surveyors

Data from: May 2018