First time buyers taking bigger share of the UK mortgage market

The mortgage market in the UK grew again during July, with more borrowers with small deposits getting on the housing ladder and Norther Ireland emerging as a hotspot for borrowers.

Mortgage approvals increased by 6.7% year on year and 19.6% were granted to applicants with small deposits, up on the 18.5% recorded the previous month, according to the latest Mortgage Monitor from residential chartered surveyors e.surv.

However, despite the improved performance, the ratio of small deposit buyers remains below the 2017 peak of 21.5% recorded in April. The most recent low was recorded in December 2016, when those with small deposits represented just 16.1% of the market.

‘The mortgage market is in a much happier place than 12 months ago when, in the aftermath of the UK’s vote to leave the European Union, activity had stalled as buyers and sellers took a pause for breath. One year on and we have seen approval levels bounce back,’ said Richard Sexton, director of e.surv.

While the proportion of small deposit borrowers grew, the data also shows that those with larger deposits, defined as those with a deposit of 60% or more, saw their market share remain relatively flat month on month, accounting for 34.2% of the overall mortgage market, marginally down in the 34.5% recorded last month.

This is the sixth successive month where borrowers with large deposits have accounted for less than 35% of the total market. As a result of these changes, mid-market borrowers saw their market share drop from 47% to 46.2% month on month.

Sexton explained that the lack of growth in the larger deposit market is likely to be because highly competitive mortgage deals and Government schemes are helping smaller and midmarket borrowers either get onto or move up the housing ladder.

When broken down on a regional basis, Northern Ireland was the area of the UK with the greatest proportion of small deposit buyers. Some 31.7% of all approvals were given to first time buyers and others with small deposits here, higher than any other region surveyed.

Yorkshire was close behind as 30.6% of all loans went to this segment of the market during July. These were two of the three regions to see a greater proportion of loans go to small deposit buyers than their large deposit counterparts. The North West was the other area to do so, with 28.9% of loans approved for small deposit buyers versus 23.8% for those with more cash or equity to put down.

London continues to be the area of the UK most dominated by buyers with large savings. In the capital, just 8.3% of all loans went to small deposit borrowers in July, down from a ratio of 14.3% in the last survey. In July 42.9% of loans went to large deposit buyers.

The South East was close behind as 40.9% of all loan approvals in the region were made to those with big deposits. The South and South Wales at 38.3%, Scotland at 37.3% and Eastern England at 37% were the others to have the highest proportion of these loans.

‘The difficulties Londoners face when trying to get on the property ladder are shown here once again. “Buyers with a small deposit in the capital face a much more difficult task when they try to get on, or move up, the property ladder. The market in London is more dominated by those with cash to splash than any other area of the UK,’ Sexton pointed out.

‘By contrast, Northern Ireland is the best spot for first time buyers and others with little cash to put down. Almost a third, 31.7%, of all loans in this area went to small deposit buyers this month,’ he added.