Mortgage approvals for first-time buyers increased in the UK in September

First-time buyers in the UK and others with small deposits took a greater share of the housing market in September than in the previous month, with overall approvals also up compared to August.

While there were 66,704 mortgages approved during the month of September, the market may have been affected by continued impact of the Bank of England’s base rate rise in August as there were fewer borrowers with large deposits.

According to the mortgage market monitor from residential chartered surveyors e.surv, large deposit borrowers, defined as having a deposit of 60% or more, accounted for 30% of the market, lower than the 32.5% recorded in August and the 33.8% seen in July.

Small deposit borrowers saw a growth in market share month on month from 22.8% to 24.2% between August and September. Meanwhile, mid-market borrowers also saw an increase in market share to 45.8% of the overall market, compared to 44.7% the previous month.

Richard Sexton, director at e.surv, pointed out that September was the first month many home owners would have received their new, higher mortgage bills if they are on a standard variable rate (SVR).

Richard Sexton said:

‘But first-time buyers were not affected by such matters, and there was a strong increase in the proportion of the market occupied by these borrowers. Young buyers may have been helped onto the ladder by the fact house price growth has slowed across many areas of the country. Lower prices mean that would-be buyers can achieve their dream of home ownership much sooner, and this appears to have been borne out by these figures.

‘With existing home owners trapped on expensive standard variable rates (SVRs) now feeling the cost of higher mortgage rates, the remortgage market cannot be underestimated and activity was up compared to last month and September 2017.

‘Despite the rate rise, new mortgage borrowing is still very competitive and home owners will continue to be tempted by cheap fixed rates. This will protect them against future base rate rises.’

When broken down on a regional basis, the figures shows that every part of the UK saw a smaller proportion of loans given to large deposit borrowers than a month ago. London continued to be the market most dominated by these borrowers, with 40.5% of all loans going to this segment of the market.

Close behind was the South East on 37% and then the South and South Wales on 32.7%. In contrast, some 20.3% in Yorkshire had a large deposit. This was ahead of the North West and the Midlands, which both saw 24% in the month.

Four regions, Northern Ireland, the North West, the Midlands and Yorkshire, saw a greater number of loans go to small deposit borrowers than their large deposit counterparts. In Yorkshire some 33.5% of loans were to first-time buyers and others with small deposits.

Elsewhere, in the North West some 30.4% of all loans went to this part of the market while in Northern Ireland this ratio was 28.9%. The final region to have more small deposit borrowers than those with large deposits was the Midlands, with 28% of loans going to the former category.

London once again was the market with the fewest small deposit buyers. Just 13.8% of all loans went to this part of the market during September, ahead of the South East at 19.4%.

Sexton concluded:

‘Every single region reflected the national trend and saw a greater number of smaller deposit borrowers, while those with larger amounts of equity were squeezed. Those with small deposits in London and the South East still face a much harder time than those in the north and Northern Ireland. However, the slowdown in the capital will help more get onto the ladder in future months.’

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