UK property lending market sees rise in buyers with smaller deposits

Home buyers needing small deposits are making up a larger share of the property market with the latest figures showing they account for more than a fifth of all new mortgage approvals.

In total home borrowers with a deposit of 15% or less made up 20.5% of the market in February, substantially higher than both the previous month and the same point last year, according to the Mortgage Monitor report from residential surveyors e.surv.

Last month, these borrowers took 18.7% of the mortgage market and in February 2016 they represented 15.7% of all house purchase loans granted and the report points out that this growth came despite the overall number of house purchase approvals dropping slightly between January and February.

Overall there were 66,911 loans approved in February, down from 67,430 in January and down 7.4% compared to the same point in 2016.

‘Buyers with smaller deposits are growing in number as more people get themselves onto the property ladder. The new year started in a positive fashion and this trend has continued into February,’ said Richard Sexton, director of e.surv chartered surveyors.

‘This may be because mortgage lenders are now more receptive to first time buyers, but also could be the number of government housing schemes helping people save for their deposit to buy a home,’ he explained.

But he pointed out that despite this positive performance, the market for first time buyers and those with small deposits still needs support. ‘These buyers are the key to housing chains, allowing others to sell on and move up the ladder. It will be interesting to see what trends develop as the year progresses,’ Sexton added.

The data also shows that the proportion of loans made to home buyers with large deposits dipped below 35% in February but these borrowers continue to outstrip their small deposit counterparts.

Larger deposit borrowers, defined as those with a deposit of 60% or more, made up 34.7% of the market in February, below the 35.4% of all mortgage approvals recorded in January and continues a general trend away from large deposit borrowers in recent months.

‘These figures show that while the number of small deposit buyers obtaining mortgage finance has increased, this segment of the market remains in the shadow of those borrowers with larger sums,’ Sexton said.

‘However, with many big banks fighting over this segment of the market, some challenger lenders have refocused their attention towards first-time buyers. The range of products available for borrowers with a small deposit has increased significantly in recent years, allowing more and more people to achieve their housing aspirations,’ he added.

The North West reclaimed its position as the best place to purchase a home if you have a small deposit with small deposit buyers represented 30.8% of the North West mortgage market in February, higher than the 27.2% seen in this region in January.

Yorkshire slipped back to second place with the proportion of small deposit loans reaching 30.1%, lower than January’s 31.6% and overall these were the only two regions where the level of small deposit borrowers outnumbered large deposit ones. In the North West 24% of loans went to those with big deposits and in Yorkshire it was 25.2%.

Northern Ireland was the other area which saw more than 30% of the market taken by small deposit borrowers. In February they made up 30.8% of all approvals, the same rate seen in the North West.

At the other end of the scale, London was the area most dominated by buyers with big deposits. Some 43% of borrowers in the capital this month had deposits of more than 60%, more than anywhere else in the UK. By contrast, just 12.8% of approvals in London went to small deposit borrowers, less than all other areas surveyed.

The South and South Wales at 39.9%, Eastern England at 37.6%, the South East at 37.5% and Scotland at 37.2% were the other areas to see more than a third of loans go to buyers with large deposits.