First interest rate rise in UK for a decade did not dent mortgage market

The mortgage market in the UK grew between October and November after the first interest rate rise for a decade with approvals up 2.5% month on month, the latest data shows.

It may have been a case of borrowers looking to switch from variable rate products and lock into lower fixed rate deals, according to the mortgage monitor report from residential chartered surveyors e.surv.

However, approvals are still 1% lower compared to the same period a year ago and the number of borrowers with small deposits, usually first time buyers, being approved continued to decline.

Across the UK 17.2% of all loans went to these borrowers, continuing a recent downward trend. Last month 17.7% of approvals were made to small deposit borrowers and November’s figure is even further back from the 19.8% recorded in September and 20.3% in August.

However, this month’s percentage is ahead of the most recent low point in December 2016 when small deposit borrowers represented just 16.1% of the overall market.

‘After months of speculation, the Bank of England base rate increased to 0.5% and this prompted many people to switch their mortgage and lock in a low rate. Overall approvals have increased month on month and we expect this to continue as those on variable rate mortgages see their monthly payments increase. Many will be able to switch elsewhere and save,’ said Richard Sexton, director of e.surv.

The report also shows that although the proportion of small deposit buyers fell, there was no increase in the market share of those with large deposits. Some 36.5% of all approvals went to those with large deposits, defined by this survey as those with a deposit of 60% or more, unchanged from the previous month. This meant there was a boost to mid-market borrowers, with this group taking up 46.3% of the market compared to 45.8% in October.

‘While the mortgage market as a whole has continued its impressive recent performance, there are concerns about first time buyers and those with small deposits being squeezed. Their share of the market continues to fall, which shows how important it is for lenders, Government and builders to do more to support buyers struggling to get onto the ladder,’ said Sexton.

Yorkshire offered the best chance for first time buyers and other people with small deposits to get onto the property ladder this month with 26.3% of all loans went to this part of the market during November, a higher proportion than any other region.

Yorkshire was one of only two regions to see more or an equal proportion of loans go to small borrowers than their larger deposit counterparts, the other being the North West. In the North West 25.7% of loans went to this segment versus 25% to large deposit borrowers while in Yorkshire the ratio was 26.3% for both.

London continued to be the market most dominated by large deposit buyers with 41.6% of all loans went to these borrowers, a higher proportion than anywhere else. By comparison, just 15.2% went to those with smaller deposits. The picture was similar in the South East, where 41.2% of loans went to larger buyers compared to 17% with smaller pots of cash. This continued the long-] standing trend of better affordability for buyers in the north of England over southern regions.

‘Once again we are seeing Northern areas providing the best markets for first time buyers to purchase their first home. Yorkshire, with big cities such as Leeds and Sheffield as well as smaller towns and villages in rural areas, is proving increasingly attractive to first time buyers as low prices make it easier to get onto the ladder. By contrast, London’s harsh property market means it is more difficult to buy a home in the capital than anywhere else in the UK,’ Sexton concluded.

Written by: Houseladder