Mortgage approvals declined slightly between January and February in the UK but the number of loans to first time buyers and small deposit borrowers increased, the latest mortgage monitor report shows.
There were 66,364 mortgages approved, seasonally adjusted, during February 2018, some 1.25% lower than in January 2018 and down 2.6% compared to February, 2017 according to the date from the report from residential chartered surveyors e.surv.
However, when broken down by customer type, the proportion approved for first time buyers and others with small deposits increased from 21% to 21.1%.
The report suggests that despite the monthly fall in approvals, recent news has been positive and there was a strong performance in December and January, caused by the Bank of England’s decision to increase the base rate to 0.5% in November 2017.
Since then many home owners have chosen to remortgage to have security about their repayments. While this increase is small, both figures are higher than the averages seen in the market recently. In December 2017, 18.2% of loans were to small deposit borrowers while the month before it was just 17.2%
‘Activity is expected to pick up again in future months as existing homeowners continue to feel the cost of increased mortgage payments in their pockets. Attention will also turn to when the next base rate rise takes place, with many experts predicting this for the late spring or early summer,’ said Richard Sexton, director at e.surv.
‘However, with the recent Spring Statement announcing stamp duty relief has helped over 60,000 first time buyers, market conditions are still very favourable right now for those looking to take their first steps,’ he added.
The data also shows that there was another fall in the proportion of loans approved to borrowers with large deposits, defined by this survey as those with a deposit of 60% or more. In February 2018 some 33.1% of all loans went to this market segment, down on the 33.5% recorded a month ago. This percentage is further back from the 35.9% recorded in December and the 36.5% in October and November.
The proportion of mid-market borrowers remained broadly in line with recent months. During February 45.8% of all mortgages went to these borrowers, broadly the same as the 45.5% found in January and 45.9% in December. The proportion of loans given to small deposit borrowers increased this month, as did the number of approvals on an absolute basis.
Northern Ireland saw a greater proportion of loans to first time buyers and others with small deposits than any other part of the UK. In February some 35% of loans in Northern Ireland went to this part of the market. This was ahead of Yorkshire where 31.3% of loans were to these buyers and the North West, where this figure was 29.8%.
These three areas, plus the Midlands at 26.1% were the only areas where more than a quarter of loans went to this part of the market and Northern Ireland was the only areas surveyed to have a greater proportion of small deposit borrowers than large ones.
The property market in London continues to prove the most challenging for people who don’t have a large deposit. In London just 15.6% of all buyers had a small deposit this month, compared to 40% who had a large amount of equity. Other areas which are dominated by buyers with larger cash piles were the South East at 37.2% of all loans, Scotland at 35.7% and the South and South Wales at 35.6%.
‘Buyers in London and southern areas typically have a much larger amount of equity than those in northern parts of England. These markets are all dominated by large deposit buyers. By contrast, the Northern Irish property market is home to a greater proportion of small deposit mortgage approvals than anywhere else. Coupled with the lower purchase price, this is a great place for first time buyers to get onto the ladder,’ Sexton concluded.
