The proportion of buyers in the UK with small deposits, usually first time buyer, securing mortgages are rising, up for the third month in a row, according to the latest lending monitor report.
They made up 21.4% of the mortgage market in March, up from 16.1% in December 2016, the data from the report from residential chartered surveyors e.surv shows.
However, the overall size of the market has shrunk both compared with the previous month and the same stage in 2016. There were 64,695 loans approved in March 2017 compared to 66,911 in February, a 5.3% fall and 7.7% lower than a year ago.
‘Small deposit buyers, who are often first time buyers, have seen their share of the market grow despite the overall market shrinking between February and March. This is a trend which started at the end of last year and has continued into 2017, likely buoyed by the number of Government schemes and low mortgage rates,’ said Richard Sexton, director of e.surv chartered surveyors.
‘A more first time buyer oriented market is good news for all as new buyers help start chains and allow others to move up the housing ladder which is vital for a properly functioning property market,’ he pointed out.
The proportion of loans made to home buyers with large deposits remained below 35% for a second successive month, but these borrowers still outstrip their small deposit counterparts by a considerable margin.
Defined as those buyers with a deposit of 60% or more, the report says that these larger deposit borrowers made up 34.4% of the market in March, down slightly on the 34.7% ratio found in February, but the underlying trend is away from this segment of the market.
‘Buyers with the biggest deposits are always likely to dominate the mortgage market. Lenders see them as lower risk and will typically readily lend to these customers above all others. But with rates so low and competition so fierce, many lenders are choosing to target other parts of the market. This is helping borrowers with smaller deposits get finance. Even in a smaller overall market, there are more small deposit buyers than last month,’ Sexton explained.
A breakdown of the figures show that the North West and Yorkshire are the only regions in this survey where more loans were approved for small deposit buyers than larger ones. In the North West the proportion of small deposit buyers was 31.7%, versus 23.1% for those with larger sized pots of cash.
It was a similar story in Yorkshire where 30.9% of the market was for small deposits compared to 23.8% for larger ones. A before the North West saw 30.8% of loans go to first-time buyers and others with small deposits, while Yorkshire saw a ratio of 30.1%.
The Midlands at 27.3% and Northern Ireland at 26.1% were the two other areas where first timers and other small deposit buyers made up more than a quarter of the market in March.
It was the opposite situation in London where transactions continued to be dominated by buyers with cash available. Just 13.6% of buyers had a small deposit, the smallest percentage figure recorded, although this was better than the previous month when it was just 12.8%.
In London 41.9% of buyers had a big deposit, this is smaller than a month ago when 43% of loans went to this part of the market.
In Scotland 38.8% of all loans were to those with larger deposits, it was 38% in the South and South Wales, 37.8% in the South East, 36.1% in Northern Ireland and 35.1% in Eastern England.
‘With more loans going to small deposit borrowers than anywhere else, the North West and Yorkshire have proven once more that they are ideal places for people to get onto the ladder. It’s a different picture in southern regions, with London a particularly tough place for first time buyers,’ Sexton added.