Growth in number of approvals to small deposit borrowers

First-time buyers and existing homeowners capitalised on low rates across the market in October, according to fresh research from e.surv.

Its latest Mortgage Monitor found that there were 67,011 mortgages approved during October. This is 2.7% higher than September’s approval figure and is also up on October last year.

Despite the Bank of England base rate rise in August, mortgage rates have remained comparatively cheap and tempted more borrowers into the market. First-time buyers have also continued to come to market, taking a larger share of mortgage approvals than in September.

Some 24.6% of all loans went to borrowers with smaller deposits in October, higher than the 24.2% recorded the previous month.

However, with buyers holding off on moving during the Christmas period, transactions are likely to tail off as the year comes to a close. Existing homeowners looking to remortgage may swoop in to grab a cheap mortgage deal while they last, though, as rates have slowly climbed since the base rate rise occurred.

“Most agree there appears to be little prospect of another increase in the Bank of England’s base rate between now and the end of the year, yet that is no reason for potential remortgage customers to halt their search,” Richard Sexton, director at e.surv, commented.

“With rates still at historically low levels across the board, there are great deals to be found at both high street mortgage lenders and more specialist banks.”

He advised homeowners to speak to a mortgage broker to see what deals are available to them and capitalise while mortgage loans are still available with cheap rates.

Small deposit borrowers continue to increase market share

The mortgage market continued to shift towards buyers with smaller deposits, with an increase in lending to this group in October.

With 24.6% of all loans going to this segment of the market in the month, this continues the recent trend away from large deposit buyers.

Last month also saw 29.6% of all loans going to borrowers with large deposit, defined by this survey as borrowers with a deposit of 60% or more.

This figure is lower than the market share recorded in September, August and July (30%, 32.5% and 33.8% respectively).

On an absolute basis, the number of small deposit borrowers grew from 16,142 to 16,485.

“Borrowers with smaller deposits, including many first-time buyers, saw their market share increase this month. This continues the broader market trend towards these borrowers and away from those larger amounts of cash,” Sexton added.

Regions show a fall in large deposit borrowers

On a regional basis, Yorkshire saw the highest market share for small deposit borrowers, recording 33.7% in October, compared to just 21.1% for large deposit borrowers.

In fact, three other regions saw a greater number of loans to small deposit borrowers than their large deposit counterparts.

The North West recorded 31.2% of loans go to small deposit borrowers versus 23.3% for those with large deposits, while in Northern Ireland this was 29.5% against 24.7%.

The final region to follow suit was the Midlands, where 27.1% of loans went to small deposit borrowers compared to 25.7% for those with large deposits.

London, however, was the part of the country most dominated by those with larger deposits, despite the proportion dipping below 40% (39.8% for large deposits versus just 14.7% for small cash piles).

The next biggest region for those with large deposits was the South East, where 34.7% of all loans going to this part of the market. This was followed by the South and South Wales, where the figure was 31.8%.

In each of these two regions, the proportion of loans to small deposit buyers was less than 25%. The other areas in the same situation were the East Midlands and Scotland.

Sexton said while a decline in purchase activity in general has been evident since the summer, first-time buyers and others will smaller deposits will enjoy seeing similar buyers dominating the market across many UK regions.

“Those in Northern Ireland, Yorkshire, the North West and the Midlands are all operating in a fertile market for small deposit borrowers.”

He continued: “Even those people looking to buy in other regions have a better chance of obtaining finance and getting on the ladder than previously, as the country-wide picture moves away from those with large deposits.”