First-time buyers accounted for 19% of intermediary business over the last three months, the highest level since 2001, according to Paragon Mortgages’ latest Financial Advisors Confidence Tracking (FACT) Index.
The report, based on data gathered throughout Q3, found that intermediaries are dealing with 23.3 mortgage applications per month. This continues a trend in steady growth that has been in place since 2010. Despite a modest increase in Q3, levels of remortgage business remain on a long-term downward trend having dropped from more than 60% of the market in 2008, to 33% now.
Strong tenant demand continues to drive demand for buy-to-let mortgages, with 81% of intermediaries describing demand from landlords as either ‘strong’ or ‘stable’.
The report also shows an increasing bias towards longer-term fixed rates as customers look to mitigate the possible impact of higher interest rates going forward.
John Heron, director of mortgages at Paragon, said: “The levels of mortgages intermediaries dealt with during Q3 is indicative of a stronger market with the improvement being driven by a strong recovery in first-time buyer numbers. That said, activity levels remain below the pre-crisis peak of 2008, when intermediaries averaged around 33 applications per month.
“On the consumer side, the expectation of an increase in interest rates would appear to be driving a preference for longer fixed-rate periods. The volume of five year fixes has grown by around 10% since 2013, while numbers of two year fixes are now at their lowest since 2013.
“We are also beginning to see a dip in remortgage levels which may be driven by lenders working more proactively to retain customers in a competitive market. Low remortgage levels also reflect a proportion of the market which remains on highly favourable ‘legacy deals’, arranged prior to the crash of 2008.”
Fixed rate mortgages are still the most popular option for landlords and their popularity continues to grow. Landlords are also increasingly seeking out longer-terms on fixed and tracker mortgages with those seeking initial periods of five or more years up 4% and a corresponding decrease in those seeking two year terms.
Landlords seeking buy-to-let mortgages for the purpose of expanding their portfolio are down nearly 10% since Q2, while there has been a marked increase in landlords refinancing to secure a better rate.