Positive outlook for mortgage approvals
Approvals levels continue to outperform 2016 levels
Low mortgage rates entice borrowers to market
Small deposit borrowers have most success in the North West, but market share dropped
Mortgage approvals remained relatively flat between August and September, but are still well above the levels recorded a year ago.
There were 66,185 mortgage applications (seasonally adjusted) approved during September, according to the latest Mortgage Monitor from e.surv, one of the UK’s largest residential chartered surveyors.
While this figure is down marginally by 0.6%, compared to August it remains well above the comparable month in 2016. This September, approval levels were 4.7% higher than 12 months ago.
However, the proportion of the market taken by small deposit borrowers has dropped month-on-month, falling from 20.3% to 19.8%.
This is still well ahead of the most recent low point for the market – in December 2016 – when small deposit borrowers made up just 16.1% of the market. However, it is also some way off the 2017 peak of 21.5%, which was recorded in April.
Richard Sexton, a Director of e.surv Chartered Surveyors, comments:
“Mortgage approval rates have remained impressively high over the summer months, as buyers take advantage of low mortgage rates and buy a home for the first time or move up the property ladder.
“It is particularly striking when compared to 12 months ago when the market was contracting following the UK’s decision to leave the European Union. A year later and the housing market is back on its feet and motoring along nicely.”
Borrowers move to secure low rates
Large deposit borrowers – defined as those with a deposit of 60% or more – gained their highest share of the market for eight months in September.
Big borrowers accounted for 35% of the mortgage market during the month, ahead of the 34.4% recorded during August.
While the market share of larger deposit borrowers grew, first-time buyers and others with smaller deposits saw their share shrink.
Those in between the two, the mid-market customers, saw their market share remain broadly the same. These represented 45.2% of the market in September compared to 45.3% a month ago.
On an absolute basis, the number of small deposit buyers fell slightly this month. There were 13,105 mortgages approved to this segment of the market compared to 13,427 in August.
Richard Sexton, a Director of e.surv, comments:
“The growth in larger deposit borrowers comes at the expense of those with smaller amounts of equity. With mortgage rates beginning to creep up ahead of a potential interest rate rise in November, perhaps this has prompted homeowners to take action and secure a low rate while they can.
“Remortgage activity is very high at the moment and, while rates are starting to rise, there are still many great deals on the market for borrowers to take advantage of.”
North West is best location for small deposits
First-time buyers and others who have small deposits continue to have the best mortgage chances in northern areas.
August saw Yorkshire being crowned as the region with the greatest proportion of small deposit buyers, while this month it was the North West which has taken the top spot.
Some 32.7% of all loans in the North West went to this segment of the market during September, ahead of every other region surveyed.
These three areas were the only regions surveyed to see more loans go to small deposit buyers than their large deposit counterparts.
Yorkshire once again performed strongly, with small deposit buyers making up 29.3% of approvals. This was ahead of Northern Ireland on 28.1% – the only other area to see at least a quarter of its loans go to these buyers.
Only the North West and Yorkshire saw a greater proportion of loans approved to small deposit buyers than their larger deposit rivals. In the North West 23% of the total market went to those with large amounts of equity while in Yorkshire the figure was 25.1%.
Buyers in London and the South East found the going more tough if they had a small deposit. In the capital just 13.1% of approvals went to these borrowers versus 40.7% who had a larger cash pile.
The situation in the South East was similar with 41.3% of loans going to large deposit borrowers in September compared to 16.9% of those with small amounts of cash.
Richard Sexton, a Director of e.surv Chartered Surveyors, concludes:
“Borrowers in London who don’t have either a big deposit saved or large amounts of equity in their existing property are finding things particularly difficult.
“These markets are dominated by those with cash to splash, making it more difficult for young buyers to get onto the ladder.
“By contrast, northern England and Northern Ireland are the markets most receptive to those with a small deposit. This month it was the North West which was the best location for first-time buyers, but Yorkshire and Northern Ireland are also ideal places to get onto the property ladder for the first time.”
Data source: e.surv Chartered Surveyors
Data from: September 2017