Low rates and end of year deals boost residential mortgage market

Residential mortgages approvals in September 2019 reached 65,997, up 0.7% month on month and 0.6% year on year with rates remaining low and tempting more buyers, the latest finance monitor report suggests.

Swap rates, used by banks to help decide how to price their loans, have been at historically low levels in recent months and has helped keep mortgage rates competitively priced. While competition between lenders has increased as they look to meet their annual targets, according to the report from chartered surveyors e.surv.

In September, 28.7% of all loans were to first time buyers and others with smaller deposits, higher than the 28.3% recorded a month ago. Large deposit borrowers also grew their market share from 27.7% to 27.9% between August and September.

‘While the supply of new housing stock entering the market remains limited, small increases to affordability have combined with competitive price offerings from lenders to entice some buyers to market,’ said Richard Sexton, director at e.surv .

‘The current activity levels in the housing market have certainly played a part in incentivising lenders to price their offerings more keenly than ever, in some cases,’ he added.

Many existing home owners have been tempted to take advantage of low rates to remortgage and this activity has contributed to the increase in the proportion of loans to those with large deposits. The size of this sector of the market rose from 26.6% to 27.9% between August and September.

These two swings caused the size of the midmarket to shrink from 45.1% to 43.4%. On an absolute basis, the number of small deposit borrowers was 18,941 in September, this compares to 18,549 in August.

Sexton pointed out that the softening of the London property market has created opportunities for first time buyers in what has been a historically tricky market for small deposit borrowers. Some 19.7% of mortgage approvals in the capital were for first time buyers and others with smaller deposits, up from 19.4% in August and 17.7% in July.

But, despite this modest boost, borrowing in London is still dominated by large deposit borrowers. 35.4% of all lending in the city went to those with a deposit of 40% or more. This is the largest proportion of anywhere in the country. The South East was almost as popular for large deposit borrowing, with 34.4% of all lending in the region going to this market segment.

There were only three English regions where the number of small deposit borrowers outstripped their larger deposit counterparts. These areas were Yorkshire, the North West, and the Midlands. Yorkshire was the region with the highest proportion of small deposit borrowers, recording 35.5% during September. Elsewhere, Northern Ireland was close behind with 35.1%, followed by the North West at 34.7% and the Midlands at 33.4%.

‘High house prices in London have traditionally made it a tricky market for first-time buyers and others with smaller deposits. While the market still certainly favours large deposit borrowers, it’s encouraging to see even a slight boost for buyers who lack these resources,’ Sexton explained.

‘Opportunities for first time buyers and others with smaller deposits remain more plentiful outside the capital. This latest data further confirms that the north of England and Northern Ireland are still some of the most hospitable markets for first time buyers,’ he added.