Around 66,543 mortgages were approved in August, seasonally adjusted, with an increase in approvals to borrowers with small deposits, including many first-time buyers, according to the latest mortgage monitor from E.surv.
This month 22.8% of all loans went to this part of the market, higher than the 22.1% recorded a month ago.
Following the Bank of England base rate rise to 0.75%, its highest level since 2009, this may also have prompted increased levels of activity, as borrowers try to lock in a low fixed rate deal while borrowing is still relatively cheap.
Richard Sexton, director at E.surv, said that August is traditionally a quiet month for the UK’s housing market but activity remained strong this year.
He added: “Borrowers were racing to remortgage and seal a competitive mortgage, prompted by the rise in the Bank of England base rate.
“Strong activity should continue into September and October as homeowners receive their new, higher mortgage bills and look to switch.”
Large deposit borrowers fall
Borrowers with large deposits saw their market share squeezed during August, as activity increased in other areas of the market.
Large deposit borrowers saw their market share fall from 33.8% to 32.5% between July and August. At the same time, small deposit borrowers saw their market share increase from 22.1% to 22.8%.
There was a similar increase in the proportion of mid-market borrowers, with 44.7% of all approvals going to this segment of the market compared to 44.1% in July.
Thanks to their increased market share, the number of small deposits borrowers was 15,172, compared to 14,716 a month ago.
Sexton said there was a small shift toward small deposit borrowers this month, but the number of large deposit borrowers continued to outstrip this market segment.
He added: “All types of borrowers, regardless of deposit size, are being tempted into the market by historically low mortgage rates and favourable criteria at mortgage lenders.”
While those with larger deposits tend to have an easier time accessing finance in the UK mortgage market, these borrowers have a different experience depending on where in the country they are looking to buy.
London continued to be the market most dominated by large deposit buyers. Some 41.5% of all loans in the capital went to this part of the market, although this was slightly down on the 42.1% recorded a month ago.
The South East also saw a high proportion of these borrowers, at 38.8%.
At the other end of the scale, Yorkshire was one of just two regions where more loans went to small deposit borrowers than their large deposit counterparts. Yorkshire saw 30.9% of approvals go to small deposit borrowers, versus 23.9% for larger borrowers.
In the North West small deposit borrowers accounted for 29.7% compared to 25.5% for those with larger savings.
Northern Ireland had the largest proportion of small deposit borrowers, at 31.9%.
London was the most difficult market for those with small deposits to contend with, as just 12.1% of all loans went to those with small deposits during August. In the South East this figure was 18.1%.
Sexton concluded: “While small deposit borrowers, such as first-time buyers, may find it difficult in markets such as London, northern regions and Northern Ireland have a host of great opportunities for these borrowers.
“Even in the capital, prices are declining gently following a prolonged period of rises, meaning salaries can play catch up and borrowers can find their ideal home.”