Homebuyer deposits dropped 6pc in Q4 2013
The typical homebuyer applied for a mortgage with a deposit of £66,259 in December 2013. This was £4,106 less than in September – before the Help to Buy mortgage guarantee scheme opened for applications – when the typical buyer put forward a deposit of £70,365.
With average purchase prices creeping up by 1% from £228,882 in September to £230,372 in December, the typical loan to value ratio rose from 69.3% to 71.2%, indicating a growing number of mortgage applicants with smaller deposits.
The latest Index – using data from more than 500 brokers and 800 estate agents – also brings more good news for consumers: total mortgage product numbers rose for a third successive month to a new record of 12,106 in December, while three year fixed rates and two year tracker rates both hit their lowest point for six and a half years.
Buyers in the three regions where deposits are the highest – Greater London, the South East and South West – appeared to benefit most from the growing availability of low deposit mortgages at the end of 2013.
The typical buyer deposit fell by 12% in the South East from September to December, by 7% in Greater London and by 4% in the South West.
In contrast, deposits grew faster than purchase prices across the North, North West and Yorkshire and Humberside, while East Anglia saw a significant leap in the amount of money buyers put forward as a deposit.
This trend may be influenced by existing owners in these regions making equity gains thanks to rising property values, helping them to put forward more funds for a deposit as they move up the property ladder.
Using average mortgage rates supplied by moneyfacts.co.uk, the Index also shows three year fixed rates fell by 0.04 basis points (bp) in December to 3.84%: the lowest average in six and a half years since before June 2007. Average two year tracker rates hit a similar low, falling 0.01bp to 2.88% in December.
The average number of mortgage products available rose for the third consecutive month in December to 12,106: the highest number recorded since April 2009 when the Index began tracking this data.
Total mortgage and remortgage applications fell by 35% between November and December as the holiday season had its usual impact. However, with consumer appetite and mortgage availability vastly improved during 2013, this compares favourably with a 44% slump between November and December 2012. Application volumes in December 2013 remained 71% higher than in December 2012.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Competition breeds choice and buyers with limited savings for a deposit can pick and choose from a growing range of high LTV products, whether or not they opt for the government-backed Help to Buy route.
“Raising a deposit has long been the biggest challenge for first time buyers in the current climate. Until recently when property values have improved, even homeowners were struggling with limited equity in their properties to support their next purchase. It’s encouraging to see a situation emerging where deposit requirements need not block aspiring buyers from taking advantage of growing choice and improving rates.
“The stagnant property market of recent years has been firmly consigned to the past and activity levels look set to keep on rising this year. Mortgage lenders have not been shy about launching increasingly competitive offers at 90-95% LTV. With regional building societies competing alongside high street lenders, it should mean the benefits are shared among buyers across the length of the country.”