There was a positive start to the year for the UK mortgage market, with an increase in the number of small deposit borrowers being approved, says e.surv.

What’s the latest?

First-time buyers are continuing to return to the property market despite November’s interest rate hike.

More than a fifth of people purchasing a property put down a deposit of less than 15% in January, according to chartered surveyors e.surv.

The group said that while the number of buyers with large deposits was continuing to decline, it had seen a steady increase in loan approvals for those with only a small amount to put down since November last year.

Richard Sexton, director at e.surv, said: “First-time buyers and others with smaller deposits have experienced a strong start to the year, with the proportion of loans rising compared to the end of 2017.”

Why is this happening?

Part of the increase in first-time buyer numbers can be attributed to the fact that the overall mortgage market expanded in January.

A total of 66,484 loans were approved during the month, up from 61,039 in December.

But there has also been a marked shift in the make-up of the market, with the proportion of buyers putting down at least 40% of their property’s value declining from 36.5% in November to 33.5% in January, while there was also a fall in those with medium-sized deposits.

But the proportion of borrowers who put down up to 15% increased from 17.2% in November to 21% in January to stand at 13,962 individual mortgages.

One driver behind the increase in first-time buyers is the range of government schemes to help people purchase their first home.

At the same time, a raft of tax changes has led to a fall in buy-to-let investors, who typically compete with first-time buyers for the same properties, making it easier for people to take their first step on to the property ladder.

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Who does it affect?

E.surv said the north west saw the highest proportion of mortgages approved for people with only small deposits at 31.1%, followed by Yorkshire at 30.3% and Northern Ireland at 28.9%.

The rise in lending to this group meant in the north west and Yorkshire more mortgages were approved for people with small deposits than big ones.

But at the other end of the scale, buyers without big deposits are struggling in London, where those putting down 15% of the home’s value or less account for just 16.6% of the market.

Sounds interesting. What’s the background?

The group said November’s interest rate hike, which was well flagged up in advance, had had a noticeable impact on the mortgage market.

It said the move by the Bank of England to increase mortgage rates from their record low level had spurred people to either move ahead with a purchase or switch to a new deal.

Sexton said: “While it is now two months on from the base rate rise, we are starting to see those who were alarmed by the talk of increased rates finalise new mortgage deals, whether with their existing lender or elsewhere.”

Top 3 takeaways

  • First-time buyers are continuing to return to the property market despite November’s interest rate hike
  • More than a fifth of people purchasing a property put down a deposit of less than 15% in January
  • The proportion of buyers with large deposits is declining, while those with small deposits is increasing 

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