My Mortgage Direct study confirms first-time buyer return

Amanda Jarvis

January 17, 2006

The final quarterly mortgage trends survey for 2005 published by My Mortgage Direct has confirmed the predicted return of the first time buyer to the housing market.

“The second half of the year had seen FTB applications mostly in single figures but that rose sharply in December to 20%, which is excellent news for the industry,” said Paul Hearnden, managing director of My Mortgage Direct. “New applicants entering the market at the bottom means movement will follow all the way up to the top.”

“Remortgages continued to dominate our daily business in the last quarter, following the trend of 2005,” added Hearnden. “But with FTBs coming out of hibernation I believe the balance will now start to tilt towards movers and that 2006 will see less activity in the remortgage arena.”

At the other end of the scale is interest from investors with just 5% of applicants looking for buy to let mortgages, indicating that homeowners are now putting their current lifestyle first rather than looking at property as a savings vehicle.

“The main drivers of this trend are valuers being even more cautious on rental yields, which can stop an application dead in its tracks, plus the U-turn by the Chancellor,” said Hearnden. “Lenders are trying to address the first point by altering criteria, but the about-face taken by Gordon Brown has not only stopped people looking at new propositions but has also caused them to question the viability of existing portfolios.”

By far and away the most popular product for borrowers in the last quarter was the tracker mortgage, reflecting a swing away from fixed rates which dipped dramatically in late summer after lenders withdrew their bargain offers.

“Rate stability is the reason for this. Borrowers are much more aware of the effect that base rate changes will have on their monthly budget and choose products accordingly,” said Hearnden. “With rates looking unlikely to change much over the next two years, many borrowers feel that a tracker is far more attractive option than a fixed rate as they can benefit from any fall in interest rates.

“The fixed rate offers should always be considered at the outset as we have seen some exceptional offers from lenders that have been out of step with tracker rates during the year.”

Key trends for October – December 2005:

-Surge in first time buyers

– Remortgages still dominating applications

– Buy to let interest in the doldrums

– Trackers the product of choice

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