First-time buyers take advantage in October - e.surv Chartered Surveyors

Market Insight, Mortgage Monitor //

Low mortgage rates support activity in November

Growth in number of approvals to small deposit borrowers. Four regions are dominated by these buyers. Overall market up compared to last month.

Low mortgage rates support activity in November

    • Mortgage approvals up year-on-year
    • Cheap mortgages remain for borrowers with appetite
    • Large deposit borrowers dominate London region

The number of mortgages approved in November was flat compared to the previous month, but a competitive remortgage and first-time buyer market meant activity was actually up compared to the same point a year ago.

The latest Mortgage Monitor from e.surv, the UK’s largest residential chartered surveyors, found that there were 67,109 mortgages approved during the month of November (seasonally adjusted).

This is marginally higher than October’s figure when 67,011 approvals were recorded.

Compared to November 2017 there was a healthy increase in activity, with approvals up 4% year-on-year.

Low rates offered by mortgage lenders continue to represent good value for those with an appetite to commit to remortgaging. But in addition to these remortgages, first-time buyers have continued to increase their market share.

In November 25.9% of all loans went to borrowers with a small deposit. This is higher than the 24.6% recorded a month ago, as well as the 24.2% market share in September.

This has helped sustain activity towards the end of the year. Typically, the number of home buyers searching for new homes tails off as the country heads into winter.

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

“Conventional wisdom suggests that as we reach the end of the year, the number of people looking for houses drops away.

“But while this is likely to be the case next month, the latest approval figures suggest that cheap mortgages are attracting a consistent level of borrowers into the market, regardless of the weather.

“However, in December mortgage lenders often look to secure their annual targets, sometimes resulting in keenly-priced deals on offer at the end of the year.

“We have already seen a number of cheap first-time buyer deals launch in recent weeks, and other lenders could follow suit.”

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

Increase in small deposit borrowers once again

The number of mortgages approved for small deposit buyers rose once again in November, as the market share of mid-market and large deposit borrowers were squeezed.

Large deposit borrowers accounted for 28.9% of the market in November, lower than the 29.6% recorded a month ago.

Despite this fall, the proportion of loans to midmarket borrowers dropped back month-on month. This was thanks to the rise in loans to small deposit customers.

Some 45.2% of all loans went to mid-market borrowers this month, lower than 45.8% recorded in October.

On an absolute basis, the number of small deposit borrowers grew rapidly from 16,485 to 17,381.

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

“The market has continued to shift towards those first-time buyers and others with smaller deposits, and away from those with large amounts of equity in their property.

“Almost 1,000 additional small deposit buyers achieved their dream of homeownership this month compared to October.”

Proportion of large deposit loans by region:

Yorkshire is small deposit hotspot in November

Northern regions of England and Northern Ireland continued to be the most attractive for small deposit house hunters.

In Yorkshire, 34.8% of loans were awarded to borrowers with smaller deposits, higher than any other region.

This put the region ahead of the North West which recorded 31% in November – and Northern Ireland, which scored 29.2%.

These three regions all recorded a higher proportion of small deposit borrowers than their large deposit counterparts this month.

The fourth area where this was the case was the Midlands, where small deposits made up 28.5% of the region’s market.

At the other end of the scale, just 16.5% of borrowers in London were in this category. This

put the capital ahead of the South East, where the figure was 20.9%.

London and the South East saw their respective markets dominated by those with cash to splash.

Large deposit borrowers made up 38.2% of the market in London, while in the South East this figure was 35%.

Yorkshire (20.7%), the North West (22.8%) and the Midlands (24.9%) all saw fewer than a quarter of mortgage approvals go to this segment of the market.

In Northern Ireland, 27.8% of mortgages were to those with larger deposits.

Proportion of small deposit loans by region:

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

“While experts often talk about UK-wide averages, scratch underneath the surface and there are several distinct regional markets in the UK.

“People looking to buy in northern parts of England, as well as Northern Ireland, tend to have smaller deposits while those closer to London must have a big amount of cash to put down.

“Buyers in the south of England should not be despondent, however, as there are great pockets of value in the capital and surrounding counties.”

Data source: e.surv Chartered Surveyors

Data from: November 2018