Purchase mortgage applications up by a third

Nia Williams

January 14, 2011

This is according to the latest Mortgage Advice Bureau/Coreco National Mortgage Index which also revealed that remortgage applications fell by 1.9% during the period.

In terms of the type of mortgage people opted for, taking an average for the whole year, 58.5% of borrowers chose fixed-rate purchase mortgages although at the start of the year most were applying for variable rates (54.9%). However, by Q4, fixed-rate mortgages were the product of choice and December saw the highest percentage of fixed versus variable rate mortgages applied for (70.9%) since September 2009.

As expectation levels grow of an imminent rate rise, the balance of fixed versus variable is likely to shift even further towards fixed rate products in 2011, as borrowers no longer feel it is worth gambling on when — and by how much — interest rates will rise.

The availability of mortgage finance remained constrained during 2010, reflected in an average purchase mortgage LTV of just 69.5%, although this is up slightly on 2009 when the average purchase LTV was 68.5%.

Although remortgage activity was subdued through 2010 as a whole, there were signs at the end of the year that the remortgage market was starting to awaken from its slumber according to the research. Of all remortgage applications processed, the average LTV was 53.8%, with 54.3% of those being fixed mortgages. The average loan size of remortgage applications was £143,174.

The average age of a purchase mortgage applicant in the UK in 2010 was 37 years 5 months.

Brian Murphy, head of lending, UK-wide independent mortgage broker, Mortgage Advice Bureau, said: “The increase in mortgage applications, albeit from very low levels, has been helped by a renewed appetite by lenders to lend. However, the majority of products on the market are at LTVs below 75%, which means applicants will still need to be putting up substantial deposits to secure mortgage finance.

“But it is a step in the right direction, with almost 50% more mortgage products on the market at the end of 2010 than were available at the beginning of the year.

“Unfortunately, mortgage product availability remains constrained at higher loan to values and this is certainly hampering a full blown recovery. Lenders also continue to be extremely cautious with regards to whom they lend to, and we don’t expect to see any relaxation of lending criteria anytime soon.

“With national property prices effectively at the same level at the end of 2010 as they were at the end of 2009, and the forecasts for a flat or slight reduction in overall prices in 2011 due to concerns around public sector employment prospects, consumer confidence at a lower ebb and a limited amount of property coming onto the market, 2011 will be another challenging year for the mortgage market.”

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