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Borrowers with small deposits fail to benefit from lending uplift

  • 11/12/2015
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Borrowers with small deposits fail to benefit from lending uplift
House purchase lending increased by 1.3% in November, but lending to first-time buyers and other small-deposit borrowers continued to stall in the face of rising house prices.

According to the latest mortgage monitor from esurv, 70,511 house purchase approvals were granted last month, up from 69,630 in October.

Lending also increased annually, with 10,000 more mortgages approved to homebuyers than a year ago – the highest yearly rise seen since March 2014.

Despite healthy growth in the market, lending to borrowers with a deposit worth 15% or less of their property’s value reached just 11,493 in November, failing to improve on the 11,489 approvals granted in October. These borrowers accounted for just 16.3% of approvals last month, down from 16.5% the month before.

While lending to borrowers with smaller deposits increased by 44% since November 2014, the report noted that the current total is significantly lower than ‘adventurous’ pre-recession levels in November 2007, when 16,227 were granted.

Richard Sexton, director of esurv noted that a climb in mortgage lending had coincided with the Chancellor’s housing announcement in last month’s Autumn Statement. However, he added that plans to build 400,000 starter homes were ‘of little consolation’ to first-time buyers.

“Theoretically, first-time buyers should be benefitting from measures such as the extended Help to Buy Scheme and the Help to Buy ISA which has finally come into force – but homeownership still remains a distant dream to many.

“Mortgages may be available, inflation low and wages rising – but whether there are enough homes is another question. Supply must be addressed if aspirational homeowners are to see a real difference and only time will tell if words can translate into real benefits for first-time buyers,” he said.

Certain regions across the UK managed to defy a drop in small deposit lending, with these loans making up 27% of all lending in Yorkshire, up from 26% the month before. Small-deposit lending also increased in the North West, Northern Ireland and the Midlands.

London currently has the lowest proportion of small-deposit lending, with just 7% of these loans contributing to all loans granted in November.

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