There was 22% increase in mortgage application activity in the last month, according to the latest National Mortgage Index from Mortgage Advice Bureau (MAB).
The broker said this was in the main due to lenders continuing to cut rates and increase product availability.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index found applications for purchase and remortgage business are now 31% higher than the start of the year, and 2% ahead of the same time in 2011.
Average fixed rates continue to fall, with two-year fixed rates down the most (0.09%) compared to September. As a result of this, the percentage of purchase borrowers choosing fixed rates increased again to 86.8%. This marks another three-year high for fixed-rates on purchase business, drawing ever closer to their high of 91.5% recorded in May 2009.
MAB said the increase in activity suggests the Government’s Funding for Lending Scheme (FLS) is now filtering through, enabling lenders to compete for business through lower rates and the launch of new products.
Meanwhile, average deposits on applications for purchase rose 1.96% to £63,779, and the size of applications for purchase business remained almost static – decreasing 0.1% to £144,331 in October.
The average LTV for a mortgage application rose by 0.9% to 57.5%, and the size of the average remortgage loan fell from £159,758 in September to £157,087 in October.
“There’s been a surge in mortgage applications in the last month, especially for remortgages, and activity levels are at their highest since immediately prior to the financial crisis,” said Brian Murphy, head of lending at Mortgage Advice Bureau.
“The increase is partly seasonal, but has been boosted by the impact of the FLS. Average rates on two, three, and five year fixed rates have all come down, and the number of products offered has increased. As such applications for fixed rate deals continues to increase and are now almost 20% higher than this time last year, suggesting borrowers are looking to lock into these competitive rates to protect themselves against rate rises in the future.
“However, as yet the effects of the FLS have not translated into higher LTV lending, as banks have to set aside more capital for higher risk loans. For the market to return to full health we still need to see more being done for those at the lower end of the housing market.”