The average five-year fixed rate for mortgage borrowers in December 2012 was better than at any point since before the recession, according to the latest National Mortgage Index from Mortgage Advice Bureau (MAB).
At 4.27%, the typical five-year rate was 0.34% lower than at the start of 2012 and the lowest since MAB started gathering this data in June 2007.
This means any consumer who took out a five-year fixed mortgage at this rate will be over £14,000 better off by the end of their fixed term than if they had done so in July 2008, when average five-year rates hit 6.92%.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index also reports that activity for December 2012 was up 7.5% on December 2011, showing that the mortgage market is continuing to recover despite the usual seasonal lull.
Two and three year rates continued to fall in December to 4.28% (vs. 4.40% – November 2012) and 4.52% (vs. 4.73% – November 2012) respectively. Fixed rate deals accounted for over nine in 10 purchase and remortgage applications in the month: the highest share ever recorded by MAB.
The popularity of fixed purchase applications grew for the seventh successive month to a record high of 91.9%. Fixed deals were also chosen for 91.0% of remortgage applications, up from November’s 89.6% to the highest figure seen in this index.
With an average purchase loan to value (LTV) of 70.3% in December, the market continued to favour borrowers with significant capital to invest. Despite a slight monthly fall, the average purchase deposit grew by 14.5% (£8,158) overall to £64,325 during 2012, while the average purchase mortgages increased by 8.7% (£5,422) over the same period to £150,427.
Despite this, December saw affordability as a three month average hit its highest point of the year – 20% – with the likelihood being that higher value purchases were postponed until the New Year. The average income put forward by borrowers in the month was £38,745 (up 5% since November) while the average purchase price dipped by 10.8% from the previous month to £203,824.
Remortgage applications experienced a further drop in the average LTV in December, falling from 56% in November to 53% – significantly lower than 58% from the start of 2012.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Borrowers would usually expect to pay a premium for the certainty and security that fixed rates offer. But the current climate of incentivised lending means in many cases they are enjoying the best of both worlds. Many 60% LTV deals are readily accessible for up to five years at fixed rates below 3%, and even with 85% LTV it is possible to secure a deal below 4%.
“Buyers may be paying larger deposits, but before lamenting their prospects in the current market, it is well worth considering the amount of money they stand to save through these attractive rates.
“The level of competition means these favourable conditions are likely to last well into 2013. Whether you are looking to buy a home or remortgage your existing property, the prospects of finding an attractive deal are far greater than they were 12 months ago.”
