There was a growth in activity from lenders and borrowers across the market during October, according to the National Mortgage Index from Mortgage Advice Bureau (MAB).
The mortgage broker cited the early launch of the Help to Buy mortgage guarantee as key driver for the surge in activity.
Product numbers swelled by 907 – the biggest monthly increase since April 2011 – with the most available via brokers (8,463) for five years. Two and three year fixed rates and two year tracker rates all reached record lows as lenders seized the chance to launch ever more competitive deals.
Using data from more than 500 brokers and 800 estate agents, the Index shows an immediate response from consumers with purchase applications up by 19% in the month and 59% year-on-year.
In line with government ambitions to help buyers with smaller deposits, the average purchase loan to value (LTV) leapt by 3.3 percentage points in October to 72.2%. This is the highest figure since MAB’s records began five years ago in January 2009 and also the biggest monthly change.
Buyers’ average salary also fell to a six month low of £38,887 in October – down 2% from September – suggesting the market is beginning to open up to a wider range of house hunters.
MAB said the number of regions saw more significant changes with lower earners better served by the available mortgages. October applications in both London and the north were from buyers with 8% less income on average than in September.
The typical purchase application in London was backed up by income of £65,165 in October compared with £70,742 one month earlier. In the north typical buyers’ income dropped from £35,362 to £32,574.
London also recorded the biggest monthly increase in higher LTV applications, shifting the average purchase LTV up by 9.1 percentage points to 67.2%. This remains the lowest across England and Wales, meaning buyers in the capital continue to put up the biggest deposits both in pure financial terms and relative to the value of their homes.
The greatest monthly increases in buyer activity occurred in the south west (+50%) and the north (+47%). London saw 24% more mortgage applications from homebuyers in October than September.
Year-on-year the South East recorded the biggest increase in application volumes (+126%) while growth of 50% or more was also seen in Yorkshire and Humberside (+63%), the South West (+58%) and the West Midlands (+50%).
Using average mortgage rates supplied by moneyfacts.co.uk, the Index shows average two year trackers shed 0.07% in the month to reach 2.91% in October – the lowest seen in over six years since MAB’s records began in June 2007.
October’s three year fixed rate average also recorded a new low of 3.87% (down 0.05% from September) while average two year fixed rates did likewise by hitting 3.53% (down 0.03% from September).
Total mortgage product numbers have now increased by 26% (2,383) since Help to Buy was first announced in the March Budget. The intermediary product range has grown at a greater rate than the direct-only range in that time (27% vs. 21%).
October’s total of 11,652 products across the market has not been bettered in the four years since MAB began tracking this data in January 2009.
Brian Murphy, head of lending at MAB, said: “The Help to Buy mortgage guarantee is still in its infancy and it’s reasonable to assume the best deals for consumers are yet to come. What these figures show is that the scheme’s galvanising effects are not limited to lenders who are directly participating at this stage.
“Spreading positivity about property purchases has visibly increased demand and spurred lenders across the market into bidding to win over consumers. It is an encouraging sign that we are already seeing a change in the typical profile of mortgage applicants.
“With growing speculation about the lifespan of low mortgage rates, stringent affordability tests will ensure they can afford to keep up their repayments. In such a competitive climate, seeking advice on the best product can help to weigh up the full range of options and make a choice that suits their circumstances not just now but over the lifetime of the loan.”
