Mortgage monitor survey detects slight fall in lending to first-time buyers

Fewer mortgages in the UK are going to first-time buyers but overall home purchase lending is continuing to grow, the latest mortgage monitor report shows.

Mortgage approvals increased by 1.5% in July compared to June and were much higher than in both May and April, according to the report from e.surv chartered surveyors.

However, while in recent months first time buyers have been the main beneficiaries of overall market growth, they saw their share of the home lending market fall slightly.

Small deposit borrowers, mostly first-time buyers, represented 22.1% of the mortgage market in July, down on the 23.4% recorded in June and the report warns that the effect of the recent Bank of England interest rate rise will be felt in future surveys.

It explains that base rate increases, and the speculation which surrounds such decisions, often tempts existing home owners into the remortgage market.

Richard Sexton, director at e.surv, said:

‘Looking ahead to future months, the decision to increase the base rate to the highest level since February 2009 will be of interest across the market.

‘Many homeowners will look to remortgage immediately while others are likely to take action in September when they receive their new, higher bills.’

There was an increase in the proportion of new mortgages being given to large deposit borrowers, defined by this survey as having a deposit of 60% or more. This type of borrower made up 33.8% of the overall mortgage market in June, up compared to the 32.9% recorded last month.

Meanwhile, mid-market borrowers saw their market share stay broadly the same month on month, representing 44.1% of the total market compared to 43.7% in June.

London continued to be dominated by buyers with large deposits, with more than 40% of all new loans in the city going to this segment of the market during July. In the capital, 42.1% of all loans were to those with a large deposit, higher than anywhere else in the UK.

Additionally, just 11.4% of all mortgages in the capital went to those with small deposits, showing the difficulties first-time buyers have purchasing a property in the city. There was better news elsewhere in the country for young buyers. Of all the UK regions and nations, Northern Ireland saw the biggest percentage market share for small deposit borrowers, with 32.3% of all loans going to this part of the market.

Close behind was Yorkshire, where 32.1% of all mortgage approvals were to borrowers with small deposits. The North West was the only region to see more loans go to those with small deposits than their large deposit counterparts at 30.9% versus 25.5%.

At the other end of the scale, London was the area with the lowest percentage of first-time buyers and others with small deposits. Other areas to post low percentage figures were the South East, which saw small deposit borrowers take a 16% market share, and the South and South Wales, where this figure was 20.3%.

Richard Sexton explained:

‘While many look at the UK property market as a whole, it really is better viewed as a series of local markets, often with wildly differing characteristics. The London market is once again dominated by those with large deposits or high levels of equity in their existing home, while the North West has more first-time buyers and small deposit borrowers.

‘In general, those areas closest to London require more sizeable deposits for borrowers to get onto the ladder while northern areas often see a greater number of first time buyers.’

Kindly shared by Property Wire