Average deposits on the rise

The largest monthly increase in average deposits took place in East Anglia, where typical deposits rose 11.6% month-on-month from £46,504 to £51,877. This is also a 26.6% increase compared to October 2014 (£40,966). At the same time, typical loans in the region have decreased (from £132,325 in September to £125,039), suggesting borrowers are putting forward more of their own funds as house prices rise.  

Average deposits remain highest in London, where they have risen from £170,328 in September to £179,248: an increase of 5.2%. However, help for first-time buyers in the capital is on the horizon. Chancellor George Osborne announced in his Autumn Statement that London will be given a dedicated Help to Buy scheme, offering buyers with a 5% deposit a loan of up to 40% of the value of a new build home, interest-free for five years. Based on London’s average house price in October (£533,922), this means borrowers in the capital would pay a far more affordable £26,696 deposit.  

The Help to Buy equity loan scheme for the rest of the country – offering a 20% equity loan – has been extended until 2021 to help first-time buyers struggling to save for a deposit outside of the capital.

Table 1: Monthly and annual change in average regional deposits

Product numbers reach new high as intermediary market continues to grow

The Index also revealed that the total number of mortgage products available on the market reached a new high in October, up from 16,465 in September to 16,620. The intermediary market has been the biggest driver of this growth: direct products fell by 18 in the month while the intermediary range rose by 174. Intermediary products have risen every month so far this year and are now at a post-recession high of 11,876 versus 4,744 direct products.

Since January 2015, the broker product range has risen by 3,321, while direct-only products have increased by just 527. Of the 3,849 new products on the market since the beginning of the year, 86% are available from brokers, and new broker products outnumber new direct products by more than six to one.

Purchase applications climb in October

As the supply of mortgage products continues to grow, borrowers are flocking to the purchase market. Total purchase mortgage applications made through brokers rose 28.7% year-on-year in October, resulting in the largest number of applications in any month since the Index began tracking this in January 2009.

The vast majority (95.5%) of purchase borrowers are opting to fix their rates to extend the lifespan of the low pricing currently available on the market. This is a 1.2 percentage point increase compared to October 2014 (94.3%).

Brian Murphy, head of lending at Mortgage Advice Bureau, comments: “George Osborne’s Autumn Statement hammered home the government’s support for homeownership, with several policies aiming to improve both the supply and affordability of homes. This is sorely needed in the capital, where house prices remain much higher than in the rest of the country and saving up for a deposit can seem an impossible task. However, with average deposits rising across the UK, support is needed nationwide. The extension of the Help to Buy scheme for another year will give first-time buyers a longer window to buy with a 5% deposit and can be used in conjunction with the Help to Buy ISA for an additional boost to deposits.

The rapidly increasing number of mortgage products available on the market – particularly through intermediaries – will improve customer choice and provide more mortgages suited to a range of budgets. While lenders are limited to a small slice of the direct market, a whole-of-market broker can advise on all products, allowing them to find the most suitable and affordable deals.”