Low Rates Aid Mortgage Market Amid Property Slowdown - e.surv

Market Insight, Mortgage Monitor //

Low rates help mortgage market battle through property slowdown

Market grows slightly between August and September. Lenders’ cut-price deals have helped market remain buoyant. Modest boost for first-time buyers in London.
  • Continued growth in first-time buyer approvals
  • Cheapest mortgage deals now close to 1%
  • Yorkshire remains best location for small deposit borrowers

The mortgage market was able to fight back against a stagnant housing sector during October, as low rates tempted both new and existing borrowers to take out loans.

The latest Mortgage Monitor from e.surv, the UK’s largest residential chartered surveyors, found that there were 65,922 residential mortgages approved during October 2019 (seasonally adjusted).

This figure was virtually flat compared to September. It is a modest decrease of 1.2% compared to October 2018, a perhaps unsurprising result in a sluggish property market.

A key reason for the sustained performance is the low rates on offer at banks and building societies.

Mortgage rates have fallen dramatically in recent months, with some high street brands now offering loans with interest rates close to 1%.

The slowdown in the property market has meant fewer potential customers for banks to fight over, hence driving cheaper rates.

Some lenders may be seeking to meet year-end targets for mortgages, with many offering cut-price deals in a bid to bring in new borrowers.

First-time buyers have been one of the primary beneficiaries of this battle between the banks.

Some 29.2% of all loans were to borrowers with small deposits this month – the market segment into which first-time buyers typically fall.

This is further ahead of the 28.7% recorded in September, and the 28.3% recorded in August.

Richard Sexton, Director at e.surv, comments:

“Despite the wider property market continuing its recent slowdown, the mortgage industry has maintained steady levels of activity this month.

“Rates which have fallen to a little over 1% for the cheapest two-year fixes, have helped sustain activity.

“Competitive mortgage rates have ensured the entry of new borrowers into the market and meant that the industry has kept some semblance of momentum.”

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

October rise in small deposit borrowers

First-time buyers enjoyed a strong October, as the number of loans to small deposit borrowers continued to increase month on month.

Some 29.2% of all loans approved were to those with small deposits, a higher figure than the 28.7% recorded in September.

In the same time frame, there was also a rise in the proportion of loans approved to those with large deposits.

This group of borrowers accounted for 28.8% in October, much higher than the 27.9% recorded in September.

The movement in both small and large deposit borrowers meant that the mid-market was squeezed this month, falling from 43.4% to 42.9%.

As recently as August these borrowers represented 45.1% of the market.

The total number of small deposit borrowers this month was 19,249, higher than the 18,941 recorded in September.

Richard Sexton, Director at e.surv, comments:

“It was the mid-market borrowers who saw their market share fall this month, as borrowers with both comparatively small and large deposits fuelled activity in the mortgage market.”

Proportion of large deposit loans by region

Region Proportion of large deposit lending (October 2019) Proportion of large deposit lending (September 2019) Proportion of large deposit lending (August 2019)
Northern Ireland 20.7% 18.2% 22.2%
Yorkshire 22.9% 21.8% 19.9%
North West 23.9% 22% 20.4%
Midlands 24.7% 24.3% 23.2%
Scotland 26.7% 25.1% 25%
Eastern England 30.8% 30.8% 29.3%
South/South Wales 31.7% 29.4% 29.3%
South East 34.4% 34.4% 31%
London 35.5% 35.4% 34.6%

Yorkshire is top location for small deposit borrowers

Yorkshire was once again crowned the most hospitable region for borrowers with small deposits.

Yorkshire had a higher proportion of mortgage approvals to these borrowers than any other region during October, with 36.6% of total applications going to this sector of the market.

This put the region well ahead of the North West, its nearest rival, where 33.3% of applications were approved.

The Midlands (32.5%) and Northern Ireland (32%) were the two other areas which saw a market share of over 30% this month.

London borrowers needed the most capital to achieve their housing aspirations.

Just 20.7% of loans in the capital went to those with small deposits this month.

By contrast, 35.5% of approvals in London were for borrowers with larger deposits.

Close behind was the South East, where 34.4% of all mortgages were to this group, versus just 25.7% to those with small deposits.

Proportion of small deposit loans by region

Region Proportion of small deposit lending (October 2019) Proportion of small deposit lending (September 2019) Proportion of small deposit lending (August 2019)
Northern Ireland 32% 35.1% 33.2%
Yorkshire 36.6% 35.5% 35.4%
North West 33.3% 34.7% 34.5%
Midlands 32.5% 33.4% 31.2%
Scotland 28.2% 27% 26.4%
Eastern England 27% 27.0% 27%
South/South Wales 27.8% 26% 26.3%
South East 25.7% 24.6% 23.4%
London 20.7% 19.7% 19.4%

Richard Sexton, Director at e.surv, concludes:

“As the number of mortgage products continues to grow, borrowers across England and Wales have seen an increase in the number of options available them.

“However, saving enough cash for a deposit remains a big issue for many. Those in Yorkshire benefit from a market tilted more in their favour, while Londoners face the biggest struggles in their efforts to achieve their housing dreams.”

Data source: e.surv Chartered Surveyors

Data from: October 2019