Mortgage approvals in the UK increased by 2.7% in August compared with the previous month but were down by 0.7% compared to August 2017, new data shows.
Overall, there were 66,543 mortgages approved during August and the proportion of mortgages approved to borrowers with small deposits, including many first time buyers, increased to 22.8% from 22.1% in July.
The latest mortgage monitor from chartered surveyors e.surv, the Bank of England interest rate rise may have prompted increased levels of activity month as home borrowers try to lock in a low fixed rate deal while borrowing is still relatively cheap.
‘Borrowers were racing to remortgage and seal a competitive mortgage, prompted by the rise in the Bank of England base rate. Strong activity should continue into September and October as homeowners receive their new, higher mortgage bills and look to switch,’ said Richard Sexton, director at e.surv.
Borrowers with large deposits saw their market share squeezed during August, as activity increased in other areas of the market. Large deposit borrowers, defined by this survey as having a deposit of 60% or more, saw their market share fall from 33.8% to 32.5% between July and August.
‘There was a small shift toward small deposit borrowers this month, but the number of large deposit borrowers continued to outstrip this market segment. All types of borrowers, regardless of deposit size, are being tempted into the market by historically low mortgage rates and favourable criteria at mortgage lenders,’ Sexton explained.
London continued to be the market which is most dominated by large deposit buyers. Some 41.5% of all loans in the capital went to this part of the market, although this was slightly down on the 42.1% recorded a month ago. The South East also saw a high proportion of these borrowers, at 38.8%.
At the other end of the scale, Yorkshire had the lowest proportion of small deposit borrowers in August. Just 23.9% of all loans went to this part of the market this month. Yorkshire was one of just two regions where more loans went to small deposit borrowers than their large deposit counterparts. Yorkshire saw 30.9% of approvals go to small deposit borrowers, versus the aforementioned 23.9% for larger borrowers.
In the North West small deposit borrowers accounted for 29.7% compared to 25.5% for the rival market segment. Northern Ireland had the largest proportion of small deposit borrowers, at 31.9%. London was the most difficult market for those with small deposits to contend with, as just 12.1% of all loans went to those with small deposits during August. In the South East this figure was 18.1%.
‘Having a large deposit usually gives borrowers access to the cheapest mortgage rates, but there are still equally good opportunities for those with less cash to splash. While small deposit borrowers, such as first time buyers, may find it difficult in markets such as London, northern regions and Northern Ireland have a host of great opportunities for these borrowers,’ Sexton pointed out.
