Three year fixed rates for mortgage products reached a record low of 3.92% in September, according to the National Mortgage Index from Mortgage Advice Bureau.
Using data from more than 500 brokers and 800 estate agents along with average mortgage rates supplied by Moneyfacts, the Index shows three year rates falling 0.14% between August and September to dip below 4% for the first time since before 2007.
With two year rates also shedding 0.13 percentage points to reach a record low of 3.56%, 93% of homebuyers opted for fixed rate deals in September. This was up from 86% 12 months ago and is the most seen by the Index since it began tracking this data in January 2009.
Fixed rates also soared in popularity among people remortgaging their homes, with 91% of applicants choosing fixed rates compared with 79% in August.
| Sep 2012 | Sep 2013 |
| Average two year fixed rate | 4.57% | 3.56% |
| Average three year fixed rate | 4.89% | 3.92% |
| Average five year fixed rate | 4.60% | 3.87% |
| % of fixed rates for purchases | 86% | 93% |
| % of fixed rates for remortgages | 83% | 91% |
Two year rates have now fallen by 1.01 percentage points in the last year, while three year rates have improved by 0.97 percentage points and five year rates by 0.73 percentage points – despite the latter rising 0.04 percentage points between August and September to 3.87%.
The improves equate to a £90 saving on monthly capital and interest repayments for the average two year fixed deal, an £89 saving on a three year deal and a £66 saving on a five year deal.
| Sep 12 | Sep 13 | Monthly saving | Fixed term saving |
| Two year monthly payment | £897 | £807 | £90 | £2,160 |
| Three year monthly payment | £927 | £838 | £89 | £3,204 |
| Five year monthly payment | £900 | £834 | £66 | £3,960 |
Activity levels bounced back by 5% in September having dropped by 10% during the traditional lull between July and August. This made September the second busiest month of 2013 to date with 58% more applications than the same time last year.
As a result, more people have now applied for a mortgage in the last nine months than in the whole of 2012. Buyer activity has grown by 61% since September 2012 while remortgaging activity is up by 52%.
The emphasis on distribution shifted further towards brokers in September: intermediary product numbers increased by 2.6% to 7,979 while direct-only product numbers fell by 15% to 2,766: the lowest number in four months.
Almost three quarters of mortgage products were available through brokers (74%), compared with two thirds back in June 2012 (66%).
This builds on the trend seen in CML data for Q2 2013 when brokers enjoyed their largest share of first time buyer loans in over a year (58% vs. 59% in Q1 2012); their largest share of remortgage loans in over three years (53% vs. 54% in Q1 2010) and their largest share of home mover loans in five years (50% vs. 53% in Q2 2008).
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Variable rates briefly returned to favour when the Bank of England introduced its forward guidance, but lenders haven’t yet called time on the season of discounted fixed rate products. Thanks partly to government funding and support, affordable mortgages have now been in vogue for much of the year and the competition to win over the house-buying public should mean that conditions continue to improve in borrowers’ favour.
“It means that Help to Buy 2 is coming on-stream at a time when confidence and momentum have already resurfaced in the market. This is one reason why lenders are treading carefully with their opening offers under the mortgage guarantee, which are sure to improve as the scheme finds its feet during the remainder of this year and into 2014.
“Help to Buy will be a godsend both for aspiring first time buyers and first time sellers who have been held back by a lack of savings or equity as well as mortgage finance. The good news is that homebuyers and movers won’t be left with a choice between Help to Buy or nothing – there are plenty of attractive offers with and without government support.”
