Small deposit mortgage lending soars

An increase in the number of small deposit mortgage borrowers helped drive a 7 per cent increase in home loan approvals in July. A total of 66,08

An increase in the number of small deposit mortgage borrowers helped drive a 7 per cent increase in home loan approvals in July.

A total of 66,083 loans (seasonally adjusted) were approved in July – more than the 65,887 recorded in June and up 6.7 per cent year-on-year, according to e.surv’s mortgage monitor.

The proportion of loans granted to buyers with a small deposit – a group that includes many first-time buyers – climbed from 18.5 per cent to 19.6 per cent, although it remains below the 2017 peak of 21.5 per cent recorded in April.

The healthy figures for small deposit borrowers provide a counterweight to NAEA Propertymark’s data showing that sales to first-time buyers fell by almost a third (30 per cent).

Coming in spite of an ongoing squeeze on consumer finances, e.surv director Richard Sexton attributed the increase to “highly competitive mortgage deals and government schemes…helping smaller and mid-market borrowers either get onto or move up the housing ladder”.

But there was significant regional variation, with small deposit buyers in London finding it increasingly difficult to get on the property ladder.

The proportion of small deposit lending in the capital dropped from 14.3 per cent in June to 8.3 per cent, the figures show.

In contrast, Northern Ireland saw the proportion of small deposit lending increase from 25.7 per cent to 31.7 per cent, making it the regional hotspot.

Meanwhile, large deposit lending dipped slightly from 34.5 per cent to 34.2 per cent, with the highest proportion in London (42.9 per cent), followed by the south east (40.9 per cent) and the south/south wales (38.2 per cent).

Mid-market borrowers saw their market share drop from 47 per cent to 46.2 per cent month-on-month.

E.surv’s figures are based on data on more than one million mortgage valuations carried out between August 2006 and the present, with tens of thousands of valuations analysed each month.

Mr Sexton said: “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, with 6.7 per cent more loans agreed this July than there were in the month following the Brexit vote.”

Matthew Harris, director at Edinburgh-based Harris Independent Financial Advice, said: “We have continued to see a reasonably healthy flow of business from first-time buyers, and it remains the case that the banks are perfectly happy to lend to first-time buyers – even at loan-to-values as low as 5 per cent.

“One benefit the first-time buyer market has is it tends to be low-value properties, which means there is less of an issue with stamp duty. Properties stay on the market at the higher end, partly due to stamp duty, but at the lower end that is not a factor.

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