Larger deposit borrowers see market share squeezed

First-time buyers and others with small deposits took a greater share of the market last month than in August, according to e.surv.

Overall approval levels also rose compared to August, with the latest Mortgage Monitor from the chartered surveyor recording 66,704 mortgage approvals (seasonally adjusted).

The last few days of summer and continued impact of the Bank of England’s base rate rise continued to affect the market, results show.

With the base rate having increased on August 2, September was the first month many homeowners received their new mortgage bills, given they were on their lender’s standard variable rate (SVR).

However, first-time buyers were not affected, and there was a strong increase in the proportion of the market occupied by these borrowers. e.surv suspects that young buyers may have been helped onto the ladder as house price growth slowed across many areas of the country.

Richard Sexton, director at e.surv, commented: “There was a shift in the market towards young borrowers in September. It will be interesting to see whether this carries on in October and the rest of the year.”

He said that with existing homeowners ‘trapped’ on expensive SVRs now feeling the cost of higher mortgage rates, the remortgage market cannot be underestimated.

“Despite the rate rise, new mortgage borrowing is still very competitive and homeowners will continue to be tempted by cheap fixed rates. This will protect them against future base rate rises,” he added.

Market share of large deposit borrowers is squeezed once more

Meanwhile, borrowers with large deposits saw their market share fall once again as activity declined during September.

Large deposit borrowers – which this survey defines as having a deposit of 60% or more – occupied 30% of the UK market last month. This is lower than the 32.5% recorded in August and the 33.8% seen in July.

Small deposit borrowers, on the other hand, saw a growth in market share from 22.8% to 24.2% between August and September.

Mid-market borrowers also recorded an increase in market share, with these borrowers representing 45.8% of the overall market, compared to 44.7% in August.

On an absolute basis, the number of small deposit borrowers grew from 15,172 to 16,142.

Regions also show fall in large deposit borrowers

When broken down on a regional basis, all areas throughout the UK saw a smaller proportion of loans given to large deposit borrowers than in August.

These borrowers dominated the market in London, with 40.5% of all loans going to this segment of the market. Close behind was the South East on 37% and then the South and South Wales on 32.7%.

In contrast, just a fifth of borrowers (20.3%) in Yorkshire had a large deposit, ahead of the North West and the Midlands, which both scored 24% in the month.

Four regions – Northern Ireland, the North West, the Midlands and Yorkshire – saw a greater number of loans go to small deposit borrowers than their large deposit counterparts.

Yorkshire recorded more than a third (33.5%) of loans going to first-time buyers and others with small deposits. In the North West, 30.4% of all loans went to this part of the market while in Northern Ireland this ratio was 28.9%.

The final region to have more small deposit borrowers than those with large deposits was the Midlands, with 28% of loans going to the former category.

London, once again, was the market with the fewest small deposit buyers. Just 13.8% of all loans went to this part of the market during September, ahead of the South East at 19.4%.

Sexton continued: “Every single region reflected the national trend and saw a greater number of smaller deposit borrowers, while those with larger amounts of equity were squeezed.”

“Those with small deposits in London and the South East still face a much harder time than those in the north and Northern Ireland.

“However, the slowdown in the capital will help more get onto the ladder in future months,” he concluded.