More loans approved with smaller deposits

Michael Lloyd

November 15, 2018

First-time buyers took a larger share of mortgage approvals in October, with 24.6% of all loans going to borrowers with smaller deposits, The latest Mortgage Monitor from e.surv has found.

This represents a slight increase from 24.2% in September but continues a shift towards smaller deposit borrowers.

Richard Sexton, director at e.surv, said: “Most agree there appears to be little prospect of another increase in the Bank of England’s base rate between now and the end of the year, yet that is no reason for potential remortgage customers to halt their search.

“With rates still at historically low levels across the board, there are great deals to be found at both high street mortgage lenders and more specialist banks.

“Homeowners should chat to a mortgage broker to see what deals are available to them, and capitalise while mortgage loans are still available with cheap rates.”

Overall there were 67,011 mortgages approved during October, up 2.7% from September and up 3.5% year-on-year.

Transactions are likely to tail off as the year comes to a close, as buyers prefer not to move close to the Christmas period.

However, those existing homeowners looking to remortgage may swoop to grab a cheap mortgage deal while they last, given rates have ticked up since the base rate rise occurred in August.

In October 29.6% of all loans went to borrowers with large deposits, defined by as borrowers with a deposit of 60% or more.

This is lower than the 30% market share recorded a month ago, the 32.5% recorded in August and even further from the 33.8% seen in July. On an absolute basis, the number of small deposit borrowers grew from 16,142 to 16,485.

Sexton added: “Borrowers with smaller deposits, including many first-time buyers, saw their market share increase this month.

“This continues the broader market trend towards these borrowers and away from those with larger amounts of cash.”

Four regions recorded a greater number of loans to small deposit borrowers than their large deposit counterparts this month.

Yorkshire was the area with the highest market share for small deposit borrowers with 33.7% for those with a small deposit and 21.1% for large deposit borrowers.

Elsewhere, the North West saw 31.2% of loans go to small deposit borrowers versus 23.3% for those with large deposits while in Northern Ireland this was 29.5% against 24.7%.

The final region to follow suit was the Midlands, where 27.1% of loans went to small deposit borrowers compared to 25.7% for those with large deposits.

As usual, London was most dominated by those with larger deposits with 39.8% of loans going to that group versus just 14.7% for those with smaller cash piles.

The next biggest region for those with large deposits was the South East, where 34.7% of all loans went to this part of the market.

This was followed by the South and South Wales, where the figure was 31.8%. In each of these two regions, the proportion of loans to small deposit buyers was less than 25%. The other areas in the same situation were the East Midlands and Scotland.

Sexton said: “Whilst a decline in purchase activity in general has been evident since the summer, first-time buyers and others with smaller deposits will be delighted to see similar buyers dominating the market across many UK regions.

“Those in Northern Ireland, Yorkshire, the North West and the Midlands are all operating in a fertile market for small deposit borrowers.

“Even those people looking to buy in other regions have a better chance of obtaining finance and getting on the ladder than previously, as the country-wide picture moves away from those with large deposits.”

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