Spike in first-time buyer mortgage approvals

• Summer ends with good news for small deposit borrowers
• Larger deposit borrowers see market share squeezed
• Northern regions are best area for young buyers

First-time buyers and others with small deposits took a greater share of the market than last month, with overall approval levels also up compared to August.

As the summer drew to a close, the latest Mortgage Monitor from e.surv, the UK’s largest residential chartered surveyors, found that there were 66,704 mortgages approved during the month of September (seasonally adjusted).

The market continued to be affected by both the final days of warm weather, and the continued impact of the Bank of England’s base rate rise.

With the base rate having increased on 2nd August –  September was the first month many homeowners would have received their new, higher mortgage bills if they are on a standard variable rate (SVR).

First-time buyers were not affected by such matters, and there was a strong increase in the proportion of the market occupied by these borrowers.

Young buyers may have been helped onto the ladder by the fact house price growth has slowed across many areas of the country.

Lower prices mean that would-be buyers can achieve their dream of home ownership much sooner, and this appears to have been borne out by these figures.

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

“There has been a shift in the market towards young borrowers in September, it will be interesting to see whether this carries on into October and the rest of the year.

“But with existing homeowners trapped on expensive standard variable rates (SVRs) now feeling the cost of higher mortgage rates, the remortgage market cannot be underestimated.

“Remortgage activity was up compared to last month, and September 2017.

“Despite the rate rise, new mortgage borrowing is still very competitive and homeowners will continue to be tempted by cheap fixed rates. This will protect them against future base rate rises.”

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

Market share of large deposit borrowers is squeezed once more

Borrowers with large deposits once again saw their market share fall, with a decline in activity during September.

Large deposit borrowers – defined by this survey as having a deposit of 60% or more – occupied 30% of the UK market this month.

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

Small deposit borrowers saw a growth in market share month-on-month, increasing from 22.8% to 24.2% between August and September.

Meanwhile, mid-market borrowers also saw an increase in market share. These borrowers represented 45.8% of the overall market, compared to 44.7% a month ago.

On an absolute basis, the number of small deposit borrowers grew from 15,172 to 16,142.

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

“This was a month for first-time buyers to rejoice, as the number of small deposit borrowers grew on a percentage and absolute basis.

“Mid-market borrowers, often those second steppers moving up the ladder, also saw their share of the market grow in September.”

Proportion of large deposit loans by region:

Regions also show fall in large deposit borrowers

When broken down on a regional basis, every single part of the UK saw a smaller proportion of loans given to large deposit borrowers than a month ago.

London continued to be the market most dominated by these borrowers, with 40.5% of all loans going to this segment of the market.

Close behind was the South East on 37% and then the South and South Wales on 32.7%.

In contrast, just a fifth of borrowers (20.3%) in Yorkshire had a large deposit.

This was ahead of the North West and the Midlands, which both scored 24% in the month.

Four regions – Northern Ireland, the North West, the Midlands and Yorkshire – saw a greater number of loans go to small deposit borrowers than their large deposit counterparts.

In Yorkshire, more than a third (33.5%) of loans were to first-time buyers and others with small deposits.

Elsewhere, in the North West 30.4% of all loans went to this part of the market while in Northern Ireland this ratio was 28.9%.

The final region to have more small deposit borrowers than those with large deposits was the Midlands, with 28% of loans going to the former category.

London once again was the market with the fewest small deposit buyers. Just 13.8% of all loans went to this part of the market during September. This was ahead of the South East (19.4%).

Proportion of small deposit loans by region:

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

“Every single region reflected the national trend and saw a greater number of smaller deposit borrowers, while those with larger amounts of equity were squeezed.

“Those with small deposits in London and the South East still face a much harder time than those in the north and Northern Ireland.

“However, the slowdown in the capital will help more get onto the ladder in future months.”

Data source: e.surv Chartered Surveyors

Data from: September 2018