E.surv research covering surveyor activity in June showed almost a quarter of the UK mortgage market, or 23.4%, went to this type of borrower as mortgage lending rose by 3% from May.
Yorkshire was the top location for small deposit borrowers, with 33.7% of all loans going to these customers, but in London this dropped to 16.2%.
Richard Sexton, director at e.surv, said: “While the housing market appears to have plateaued in some areas, there was good news for those looking to borrow to fund a house purchase.
“Mortgage approval rates are up both compared to last month and the same point a year ago, suggesting that lenders are offering deals which are tempting more borrowers to the market.
“Speculation about a potential base rate rise in August may increase interest, as more borrowers look to lock in a low mortgage rate before any increases take place.”
Where cash is king
Sexton added that the patchwork nature of the housing market meant areas of London and the South East were dominated by cash buyers and those with large deposits.
“Yet the opposite is true in areas of northern England, where there are better opportunities for those with small deposits to get onto the property ladder.
“But with lenders offering low rates across the whole country, now is a good time to lock into a cheap mortgage deal before rates eventually begin to rise once more.”
More than 66,400 borrowers took out mortgages in June, according to e.surv.