February saw rise in mortgage applications
Year on year they were 9% higher than the number of applications in February 2010.
Applications were up significantly despite growing concerns that an interest rate rise is imminent. However, borrowers are clearly paying close attention to what is happening in the wider economic landscape when making a mortgage decision. Fixed rates are again the overwhelming product of choice, with 79% of all mortgage applications in February for fixed rate deals, compared to 75% in January.
The average loan size on mortgage applications in February was £123,508 compared to £128,887 in January, a drop of 4%. While the average LTV on mortgage applications dropped off slightly in February, down to 71.4% from 72% in January.
Remortgage applications were up 37% in February compared to January, and 24% higher than February 2010.
Again, fixed rates continue to be the remortgage products of choice with 72% of applications in February for fixed deals. While, the average loan size of remortgage applications in February was down a significant 18% on the previous month, falling from £150,691 to £123,508.
The average age of a mortgage applicant in the UK in February was 37 years 3 months.
Commenting, Brian Murphy, head of lending, independent mortgage broker Mortgage Advice Bureau, said: “We saw a marked increase in overall activity in February compared to January, both amongst house buyers and those looking to refinance existing arrangements. In particular remortgaging activity picked up noticeably last month, with levels not seen since 2008.
“In a ‘normally functioning market’ we would expect to see borrower activity rising month on month during the first half of the calendar year, before plateauing during the mid summer holiday period. However, over the past 12 to 24 months the market has been anything but ‘normally functioning’, so it’s mildly encouraging to see market activity appear to be following a more historic pattern, albeit at significantly lower volumes than at the height of the property boom.
“Continued media speculation around when interest rates might start rising is prompting more and more borrowers to look for the safe haven that fixed rates afford, so it was no surprise to see the percentage of fixed rate versus variable rate deals top the level in January.
“Surprisingly on the remortgage side, the proportion of fixed versus variable rate deals was lower than for house purchases. This suggests that borrowers looking to refinance are willing to take a little more risk than home purchasers, in order to keep monthly mortgage payments at manageable levels.
“Even in these uncertain times, the exceptional value relative to historic levels that many tracker rates continue to offer makes them a risk worth taking, and borrowers are probably taking the view that when rates rise they will only rise moderately, and any small increase in repayments is affordable in the shorter term.
“Also, many of those homeowners remortgaging onto trackers are choosing products that allow them to fix at a later date without incurring a penalty for switching. This gives them the best of both worlds – lower rates at the current time and the reassurance of being able to fix if rates start to rise rapidly.”