The UK residential mortgage market saw a positive start to the year with an increase in the number of small deposit borrowers, usually first time buyers, being approved in January.
Some 21% of all approvals went to small deposit buyers up from 18.2% in December and 17.2% in November 2017, according to the latest Mortgage Monitor from e.surv.
January’s data is the second full month of data following the Bank of England’s decision to increase the base rate to 0.5%. This rate rise, plus the speculation in the weeks leading up to the decision, has spurred many people into taking action, either looking to take out a mortgage or switching to a new deal, the report suggests.
These customers have now started to filter through to the approvals data, given the length of time it takes for a mortgage application to complete.
‘We are now starting to see the effects of the Bank of England’s decision to increase the base rate filtering through to the market. While it is now two months on from the base rate rise, we are starting to see those who were alarmed by the talk of increased rates finalise new mortgage deals, whether with their existing lender or elsewhere,’ said Richard Sexton, director at e.surv,.
As the proportion of small deposit loans rose, there was a fall in the amount of approvals to those with large deposits to 33.5% in January compared to 35.9% in December and from 36.5% in November 2017. Large deposit buyers are defined as those with a deposit of 60% or more.
The proportion of loans going to mid-market borrowers also fell slightly, compared to December down to 45.5% from 45.9%.
‘First time buyers and others with smaller deposits have experienced a strong start to the year, with the proportion of loans rising compared to the end of 2017. While other types of borrowers have been squeezed, the larger overall mortgage market means that more people are getting approved than a month ago,’ Sexton pointed out.
At the start of 2018, the North West was the region which saw a higher proportion of loans approved to small deposit buyers than anywhere else. The survey found 31.1% of all loans in the North West went to these borrowers in January 2018, well ahead of the 28.1% in December 2017.
This puts the region ahead of Yorkshire where 30.3% loans went to this market segment tin January and Northern Ireland which recorded 28.9%. However, only the North West and Yorkshire saw more loans go to small deposit buyers than their larger deposit counterparts.
At the other end of the scale, buyers in London face the biggest struggle with just 16.6% of loans approvals going to borrowers with small deposits. In the capital 36.7% of all loans went to those with a larger amount of equity. However, this was slightly lower than the rate found in the South East at 39.1% and Scotland at 38.1%.