Mortgages  

Small deposit home buyers shrink back

Small deposit home buyers shrink back

The mortgage market started to grow again in June, according to the latest data from e.surv, one of the UK’s largest residential chartered surveyors, but the proportion of loans granted to buyers with a small deposit fell.

There were 65,887 loans approved this month, compared with the 64,645 recorded during May (seasonally adjusted).

That total is also 1.4 per cent higher than at the same point during 2016.

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However, some areas of the market have performed more strongly than others, with those with a smaller deposit retreating.

A small deposit borrower is anyone with a deposit of less than 85.1 per cent loan to value.

In June, 18.5 per cent of all loans went to those with a smaller deposit.

This is below the 21.3 per cent recorded last month and further back from the 2017 high of 21.5 per cent, recorded in April.

But this is still well above the most recent low, recorded in December 2016, when those with small deposits represented just 16.1 per cent of the market. 

Richard Sexton, director of e.surv, said it was great news the mortgage market is growing once again.

"Approvals are up both compared to last month and June 2016. With the whole market moving this means that homeowners are able to move up the ladder, or to downsize if they need to. This also creates room at the bottom for first-time buyers to jump onto the ladder in future months.” 

Large deposit buyers – defined as those with a deposit of 60 per cent or more – accounted for 34.5 per cent of the total home loan market in June. This is higher than in May 2017, when these borrowers made up 33.9 per cent of the overall pool.

However, this is the fifth successive month that those with large deposits have accounted for less than 35 per cent of the total market.

On an absolute basis, there were 12,189 loans granted to small deposit buyers in this survey period - lower than the 13,769 approved a month ago.

These changes meant the ‘mid-market’ borrowers saw their share of approvals edge closer to the 50 per cent mark.

Some 47 per cent of all mortgages went to this part of the market in June, up from the 44.8 per cent the month before.

Mr Sexton said while the number of small deposit buyers being approved for mortgages has fallen, this should not be seen as a negative.

“As those properties up the ladder change hands this will free up those homes at the bottom of the market for first time buyers in future months. This allows the cycle of growth to continue ”

Yorkshire is top spot for small deposit buyers first-time buyers and those with small deposits are proportionately more likely to have a mortgage application approved in Yorkshire than anywhere else in the UK.

Some 28.1 per cent of all loans in the region were made to small deposit buyers during June 2017. This put Yorkshire ahead of nearest challengers the North West (26.3 per cent) and Northern Ireland (25.7 per cent). These were the only three areas to have more than a quarter of loans given to small deposit borrowers.