Mortgages to first time buyers in UK slipped in October

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The number of mortgage approvals in the UK remained level between September and October, but fell 1.5% compared to the same point a year ago, the latest monitor report shows.

Despite the market remaining flat month on month, the proportion of buyers with smaller deposits, that is many first time buyers, getting loans dropped again this month, according to the data from e.surv, one of the UK’s largest residential chartered surveyors.

Some 17.7% of all loans were went to this part of the market in October, down from 19.8% a month ago and 20.3% in August. However, this month’s figure is still above the most recent low point in December 2016 when small deposit borrowers made up just 16.1% of the market.

‘The mortgage market performed above expectations all summer, so for this to continue well into the autumn is good news for would-be borrowers. However, the drop off in small deposit borrowers, which includes many first time buyers, should also be noted,’ said Richard Sexton, director of e.surv.

‘This once again highlights the fact more should be done to help young borrowers get onto the ladder,’ he pointed out.

As the number of smaller deposit buyers dropped, this gap has been filled by those with large deposits, defined as those with a deposit of 60% or more. This group of borrowers had a higher proportion of the market in October than in any month so far this year. This month 36.5% of all loans went to this segment of the market, well ahead of the 35% found in September. The proportion of mid-market borrowers also increased this month, growing from 45.2% in September to 45.8%.

Sexton pointed out that the survey covers the last month before the Bank of England raised the base rate, so the spike in mortgage approvals for large deposit buyers is likely to be these borrowers sealing a low rate while they can.

‘With the period of historically low mortgage rates appears to be ending, many home owners have remortgaged to lock in a good deal. This has meant smaller borrowers have been squeezed out, but hopefully this just a temporary market shift,’ he explained.

Northern regions of England and Northern Ireland continue to offer the best chance for first time buyers to get onto the ladder, and for other small deposit buyers to get finance. The North West had a higher proportion of these borrowers than any other region during October, the second successive month it has topped the chart.

Some 27.5% of all loans went to small deposit buyers in the North West this month. It was the only area to see more loans approved to small deposit buyers than large ones. This put it ahead of Northern Ireland where 26.3% of mortgage approvals were to smaller deposit buyers and Yorkshire, where the figure was 25.9%. These were the only three areas to see more than a quarter of loans go to this part of the market.

The struggles experienced by buyers in the south of England were demonstrated by the fact almost 8% of approvals in London went to small deposit buyers. In the South East the ratio was 13%. Both these markets were both by borrowers with large amounts of equity. In London 44% of the market was occupied by those with big deposits, closely followed by the South East where the ratio was 43.2%.

The South and South Wales region was the other area of the UK to have more than 40% of loan approvals go to large deposit buyers. It recorded 40.9% during October.

‘The north/south divide continues to be demonstrated by these figures. If you’re a first time buyer, you are far more likely to have success in northern areas than you are in London and the surrounding regions,’ said Sexton.

‘The North West continues to be the small deposit hotspot, and is the only region where more loan approvals went to small deposit buyers than their large deposit counterparts. Close behind, Northern Ireland and Yorkshire once again demonstrated that they are a great location for people to get onto the ladder for the first time,’ he added.

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Written by: Houseladder