Bargain mortgage rates tempt new wave of borrowers to market - e.surv Chartered Surveyors

Market Insight, Mortgage Monitor //

Bargain mortgage rates tempt new wave of borrowers to market

Market grows slightly between August and September. Lenders’ cut-price deals have helped market remain buoyant. Modest boost for first-time buyers in London.
  • Market grows slightly between August and September
  • Lenders’ cut-price deals have helped market remain buoyant
  • Modest boost for first-time buyers in London

Mortgage rates were once again at low levels this month and these deals have tempted more people into the market during September.

The latest Mortgage Monitor from e.surv, the UK’s largest residential chartered surveyors, found that there were 65,997 residential mortgages approved during September 2019 (seasonally adjusted).

This is 0.7% higher than August’s figure and also represents a 0.6% increase when compared to September 2018.

Despite the Bank of England base rate increasing twice in recent years, mortgage rates have remained competitive.

Swap rates, used by banks to help decide how to price their loans, have been at historically low levels in recent months. This has helped keep mortgage rates competitively priced.

Additionally, competition between lenders has increased as they look to meet their annual targets as we reach the final months of the year, again driving down prices.

Low rates have tempted borrowers of all kinds into the market.

In September, 28.7% of all loans were to first-time buyers and others with smaller deposits. This is higher than the 28.3% recorded a month ago.

Large deposit borrowers also grew their market share from 27.7% to 27.9% between August and September

Richard Sexton, Director at e.surv, comments:

“As we leave a somewhat slow summer for the housing market and enter autumn, approvals have, perhaps predictably, picked up slightly.

“While the supply of new housing stock entering the market remains limited, small increases to affordability have combined with competitive price offerings from lenders to entice some buyers to market.

“The current activity levels in the housing market have certainly played a part in incentivising lenders to price their offerings more keenly than ever, in some cases.”

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

Growth in number of small deposit borrowers

Low mortgage rates and a raft of Government housing schemes have helped more small deposit borrowers onto the ladder in September.

The proportion of loans to first-time buyers and others with small deposits increased from 28.3% in August to 28.7% in September.

It is not just those with small deposits who have entered the market, many existing homeowners have been tempted to take advantage of low rates to remortgage.

This remortgage activity has contributed to the increase in the proportion of loans to those with large deposits. The size of this sector of the market rose from 26.6% to 27.9% between August and September.

These two swings caused the size of the mid-market to shrink from 45.1% to 43.4%.

On an absolute basis, the number of small deposit borrowers was 18,941 in September, this compares to 18,549 in August.

Richard Sexton, Director at e.surv, comments:

“Low mortgage rates have had the twin benefits of helping borrowers at both ends of the deposit-size spectrum this month.

“Both small and large deposit borrowers will be glad to see these cheap deals continue for the rest of the year.”

Proportion of large deposit loans by region

RegionProportion of large deposit lending (September 2019)Proportion of large deposit lending (August 2019)Proportion of large deposit lending (July 2019)
Northern Ireland18.2%22.2%22.5%
Yorkshire21.8%19.9%20.8%
North West22.0%20.4%21.8%
Midlands24.3%23.2%23.6%
Scotland25.1%25.0%24.1%
Eastern England30.8%29.3%28.1%
South/South Wales29.4%29.3%28.2%
South East34.4%31.0%30.9%
London35.4%34.6%33.6%

Slight boost for first-time buyers in London

The softening of the London property market has created opportunities for first-time buyers in what has been a historically tricky market for small deposit borrowers.

This month 19.7% of mortgage approvals in the capital were for first-time buyers and others with smaller deposits. This is an increase from 19.4% in August and 17.7% in July.

Despite this modest boost, borrowing in London is still dominated by large deposit borrowers. 35.4% of all lending in the city went to those with a deposit of 40% or more. This is the largest proportion of anywhere in the country.

The South East was almost as popular for large deposit borrowing, with 34.4% of all lending in the region going to this market segment.

There were only three English regions where the number of small deposit borrowers outstripped their larger deposit counterparts.

These areas were Yorkshire, the North West, and the Midlands.

Yorkshire was the region with the highest proportion of small deposit borrowers, recording 35.5% during September.

Elsewhere, Northern Ireland was close behind with 35.1%, followed by the North West (34.7%) and the Midlands (33.4%).

Proportion of small deposit loans by region

RegionProportion of small deposit lending (September 2019)Proportion of small deposit lending (August 2019)Proportion of small deposit lending (July 2019)
Northern Ireland35.1%33.2%34.5%
Yorkshire35.5%35.4%35.4%
North West34.7%34.5%33.0%
Midlands33.4%31.2%32.1%
Scotland27.0%26.4%25.7%
Eastern England26.0%27.0%27.7%
South/South Wales26.8%26.3%26.9%
South East24.6%23.4%22.6%
London19.7%19.4%17.7%

Richard Sexton, Director at e.surv, concludes:

“High house prices in London have traditionally made it a tricky market for first-time buyers and others with smaller deposits. While the market still certainly favours large deposit borrowers, it’s encouraging to see even a slight boost for buyers who lack these resources.

“Opportunities for first-time buyers and others with smaller deposits remain more plentiful outside the capital. This latest data further confirms that the north of England and Northern Ireland are still some of the most hospitable markets for first-time buyers.”

Data source: e.surv Chartered Surveyors

Data from: September 2019