The Autumn Statement from the Chancellor of the Exchequer accompanied a house purchase jump in November with approvals up 1.3% to 70,511, according to the latest Mortgage Monitor from chartered surveyors e.surv.
However, it explained that while the Autumn Statement focused on helping more people get on the housing ladder, first time buyers are yet to see the same benefits as other areas of the market.
Despite the rise, lending to small deposit borrowers, that is buyers with a deposit worth 15% or less of their property’s total value, totalled just 11,493 in November, showing no improvement on 11,489 in October. Small deposit borrowers are falling as a proportion of overall house purchase lending, accounting for just 16.3% of approvals granted, down from 16.5% in October.
The latest First Time Buyer Tracker report from Your Move and Reeds Rains reveals a similar picture. First time buyer sales dipped by 1.7% month on month from 28,600 in September 2015 to 28,100 in October 2015.
‘The Chancellor’s proposals coincided with a climb in November’s mortgage market. More prospective home buyers are find their applications successful as we near winter,’ said Richard Sexton, director of e.surv.
‘However, for first-time buyers it’s a different story. For those struggling to get their foot in the front door, promises of starter homes are of little consolation. Theoretically, first time buyers should be benefitting from measures such as the extended Help to Buy Scheme and the Help to Buy ISA which has finally come into force but home ownership still remains a distant dream to many,’ he explained.
‘Mortgages may be available, inflation low and wages rising but whether there are enough homes is another question. Supply must be addressed if aspirational home owners are to see a real difference and only time will tell if words can translate into real benefits for first time buyers,’ he added.
November saw over 10,000 more mortgages approved to home buyers than a year ago, with 70,511 loans, jumping a fifth since 59,262 in November 2014. This was the highest year on year rise seen since March 2014, as the lending market went from strength to strength amid rising confidence.
On an annual basis, this jump in overall home purchase lending has allowed an improvement in small-deposit lending. Home purchase lending to borrowers with smaller deposits grew 44% year on year from November 2014 to 8,000 approvals. However, the current total for small deposit loans, which stands at 11,493 this November, is crucially much smaller compared to the unsustainable pre-recession heights of November 2007, when 16,227 were granted.
‘When compared to last year, mortgage lending is in a much healthier place. Some 12 months ago, home buyers were still suffering from the impact of Mortgage Market Review changes, which had caused delays for lenders and deterred borrowers at the same time. However, we have emerged out of the other side into a much stabler lending climate as a result of these measures with ‘adventurous’ pre-recession mortgage approvals largely a thing of the past,’ said Sexton.
‘Some small deposit borrowers are still struggling and with house prices predicted to keep on rising there’s a real risk many may be permanently priced out of home ownership. In order to stop this, more needs to be done to remove obstacles facing homebuyers, particularly large deposit costs,’ he pointed out.
‘For many, saving for hefty deposits can be financially crippling and so low deposit options are needed to give first timers a lift onto the property ladder. Of course, the most effective way to reduce deposit costs would be a slowing of house price growth giving buyers’ savings a chance to catch up,’ he added.
November saw the proportion of small deposit lending to those with deposits worth 15% or less of their property’s total value remain static or dip slightly in most UK regions. However, the North West and Northern Ireland both defied this trend.
The North of England continues to remain a hotspot for small deposit borrowing. The North West saw the proportion of small deposit loans rise to 26% in November, up from 24% in October as the region catches up to Yorkshire’s lead with 27% of all lending to small deposit borrowers.
In Northern Ireland the proportion of small deposit lending increased to 25%. Yorkshire also saw a monthly increase although this was a smaller 1% rise. The majority of regions saw no change between October and November but the Midlands and the South East saw proportional falls of 1% to reach 20% and 11% respectively.
