More mortgage approvals to those with a small deposit

Michael Lloyd

February 13, 2019

More than a quarter (27.1%) of all mortgage approvals in January were to borrowers with a small deposit, up from 25.2% in December, e.surv’s Mortgage Monitor has found.

There was a shift in the market from large deposit borrowers to those with smaller deposits during January. The proportion of loans approved for borrowers with a large deposit or amount of equity fell from 30.1% last month to 28.1%.

Richard Sexton, director at e.surv, said: “First-time buyers are becoming the new battleground for mortgage lenders. Rates are being cut and, perhaps more importantly, lenders are receptive to applicants that previously may have found accessing finance challenging.

“Almost 18,000 small deposit buyers achieved their mortgage dream this month, a stellar result.”

These changes in the market meant very little change for the mid-market borrowers. The market share of these borrowers was almost flat, moving from 44.7% to 44.8%.

On an absolute basis, the number of small deposit borrowers grew from 16,730 in December 2018 to 17,981 in January 2019.

There were 66,350 mortgages approved in January 2019. The number of mortgages approved in January is often lower than in a typical month, as December is traditionally a slow month for house hunting.

However, there was strong growth compared to the previous month, with approvals rising 4% between December and January and compared to January 2018, approvals were down 1.8%.

Sexton added: “There are many predictions for the housing and mortgage markets in 2019, ranging from the bullish to the more cautious.

“But the data for January shows that the market has started the year in reasonable health, with approvals rising compared to December 2018.

“Hard-pressed first-time buyers will be pleased to see a swing towards borrowers with small deposits this month. If this pattern continues across the year, it will be a welcome relief to those struggling to get a foot onto the housing ladder.”

Yorkshire started the year as the region most receptive to first-time buyers and others with small deposits. Some 36.7% of all loans in the region were to this group of borrowers, higher than any other region surveyed.

Close behind was the North West, where 32.8% of loans went to this segment of the market and then Northern Ireland, where that rate was 32.7%.

At the other end of the scale, just 17.3% of London borrowers were able to get on the ladder with a small deposit, the lowest of any region recorded in January.

Large deposit borrowers, by contrast, had a much better time of it in the English capital, accounting for 38.5% of all sales.

London was followed by the South East, where 33.5% of all loans were to this part of the market. In Scotland, Eastern England, and the South and South Wales regions, this ratio was 29.3%.

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 their large deposit counterparts.

Sexton said: “Data from the first month of 2019 suggests that the trends we saw develop throughout 2018 could remain in place again this year.

“Those looking to buy in London need a large deposit to ensure they can get a mortgage deal while the markets in northern areas and Northern Ireland are much more tilted towards first-time buyers and those with less cash to spare.

“As 2019 enters full swing it will be interesting to see whether these areas continue to be dominated by small deposit borrowers.”

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