Almost 90% of mortgage applicants are opting for fixed deals, according to the latest National Mortgage Index from Mortgage Advice Bureau (MAB).
Using data from more than 500 brokers and 800 estate agents, MAB found average five year fixed rates remain at their lowest point – 4.57% – since summer 2007. Both two and three year average rates are also more attractive than at any time in the last nine months.
With 90% of purchase borrowers choosing fixed rates, this represents a three year high. After six months of growing popularity, fixed deals for purchase are now in sight of the record 92% market share recorded in May 2009. And fixed deals accounted for 89% of remortgage applications: the highest level ever recorded by the National Mortgage Index.
Favourable rates have fuelled the mortgage market’s strong performance for November, relative to 2011, and limited the seasonal lull. Despite a rush to secure properties before the nil stamp duty ended in March 2012, November 2011 saw activity levels slump by 7% from October. In contrast, the fall from October to November 2012 was just 4%.
MAB said the price war between leading lenders has seen several brands offering two-year fixed rates at 1.99% for borrowers with deposits or equity of 40%. Prices have also fallen for higher loan to value (LTV) products, and the average number of intermediary products rose again for the eighth successive month to 6,198.
Purchase mortgage LTVs recovered from a fall in October to break through the 70% marker. Despite this, November’s average of 71% is still lower than at the start of the year when it stood at 72%. LTVs for remortgage cases continued to fall in November to 56%, down from 58% in January.
The Index said that figures suggest that increased lending, supported by the Government’s Funding for Lending Scheme, has yet to help borrowers with high LTVs. Accordingly, the average size of purchase deposits for November – £63,779 – is nearly 16% higher (15.7%) than the same time last year, when it was £55,640.
Brian Murphy, head of lending at the Mortgage Advice Bureau, said: “Despite the seasonal drop in the numbers of buyers and remortgage borrowers as the festive break approaches, we have seen an encouraging level of activity during November. Following the burst of applications in October, it adds weight to the theory that 2013 will continue to see the market moving in the right direction.
“The fact a number of high street banks lent significantly less than they expected earlier in the year means it is a great time for prospective buyers and those refinancing their property to secure a fantastic rate on their mortgage. It is therefore no surprise to see fixed rates being the default choice for the overwhelming majority of borrowers.
“Looking ahead, we expect the Funding for Lending Scheme gain momentum into the New Year and prompt more banks to follow the lead of the early adopters by increasing their total lending. Competition for business can only be a good thing for consumers, who stand to benefit as rates continue to fall.”
