House keys

A further slowdown in home lending in May ahead of the EU referendum means house purchase lending activity has fallen to a twelve-month low, according to the latest Mortgage Monitor from e.surv.

May saw 65,113 house purchase approvals (seasonally adjusted), down 1.7% from 66,250 the previous month. This marks a 12-month low in lending levels, and is the lowest monthly figure for home purchase loans since the 64,626 granted in May 2015. It follows monthly declines seen in April (-5.8%) and March (-3.0%) meaning volumes have fallen 10.5% over the last three months, as the political uncertainty ahead of June’s upcoming EU Referendum may be causing caution amongst lenders and borrowers alike.

The recent falls represent a marked turnaround from the peak in lending seen at the start of the year. January and February both saw strong numbers of house purchase approvals granted (73,060 and 72,512 per month respectively) as buy-to-let landlords and second homebuyers pushed through purchases ahead of the stamp duty changes in April. Now, by comparison, the lending market is settling back into its usual rhythm. On an annual basis however, house purchase lending rose marginally in May, by 0.8%.

The proportion of small-deposit lending also dropped slightly in May, to comprise 18.4% of total home lending – down from 19.1% the previous month. Meanwhile, lending to large-deposit buyers, those with a deposit of 60% or more, picked up significantly and now makes up almost a third (30.7%) of all borrowing.

Richard Sexton, director of e.surv chartered surveyors, comments: “Lenders may need to navigate choppier waters over the next couple of months, but for now the mortgage market remains on an even keel. Homebuyers have more options than ever as lenders work to expand their range of mortgage options further. New mortgages with longer repayment terms and innovative intergenerational mortgages are offering financial buoyancy aids for buyers.

“But the EU referendum is causing some nervousness within financial circles and bringing new unknowns with it. This political milestone could impact the UK’s economic outlook and slowing growth could pose problems of its own for both lenders and borrowers."


First-time buyers face the squeeze as small-deposit lending dips

Small-deposit loans (to buyers with a deposit worth 15% or less of their properties’ total value) totalled 11,981 in absolute terms in May, down 5.3% from 12,654 granted the previous month. As a proportion of overall home purchase lending, small-deposit borrowing accounted for 18.4% in May – dipping from 19.1% in April.


Despite a drop in the proportion of small-deposit lending, the latest First Time Buyer Tracker from Your Move and Reeds Rains reveals that first-time buyer transactions in April reached a two-year high – with 32,300 completed. This was 14.9% higher on a monthly basis than the 28,100 transactions in March.

Meanwhile, large-deposit lending to borrowers with a deposit of 60% or more increased proportionally to comprise 30.7% of total borrowing, up annually from 28.2% in May 2015.

Regional snapshot: Midlands makes little yearly progress in small-deposit lending

The proportion of small-deposit lending in the Midlands stood at 21% in May, falling 3 percentage points from 24% in April. A year ago, small-deposit borrowing within the region accounted for 20% of home lending, leaving just a 1 percentage point rise across the last twelve months. Despite this lack of progress, the Midlands remains above the UK average of 18% for small-deposit lending.

RegionProportion of small-deposit loans

(May 2016)Proportion of small-deposit loans

(April 2016)Northern Ireland30%30%Yorkshire28%28%North West28%28%Midlands21%24%UK Average18%19%Scotland17%18%Eastern England16%16%South/ South Wales16%17%South East15%14%London10%9%Only London and the South East saw proportional increases in small-deposit lending, rising to 10% and 15% respectively. Meanwhile, the proportion of small-deposit borrowing in Northern Ireland stayed at 30%, continuing as the most first-time buyer friendly region in the UK.