12.08.10 by Andrew Montlake
The National Mortgage Index
Today sees the release of the new National Mortgage Index developed by National mortgage broker Mortgage Advice Bureau and London mortgage broker Coreco, which gives an interesting national and regional insight into the latest mortgage trends.
POPULARITY OF FIXED RATE LOANS RISES SHARPLY
WHILE AVERAGE LTV ON PURCHASE MORTGAGES PASSES
70% FOR FIRST TIME SINCE FEBRUARY 2010
• Average purchase loan size in July, at £139,404, highest since
2007, pre-Credit Crunch
• London borrowers cautioned against trying to ‘beat the market’
LONDON MORTGAGE REVIEW:
The average LTV on purchases in July 2010 was 68%, up from 64.8% in
June 2010, although down on July 2009 (71.1%). The average loan size
in July 2010 (£281,504) was 2.9% higher than in June 2010 (£273,468), and 21% higher than in June 2009 (£232,637).
Mortgage applications in July 2010 were split 50:50 between fixed and
variable rate deals, compared to just 24.5% of mortgage applications in
March 2010 being fixed rates.
The average LTV on remortgages arranged in July 2010 was 46.8%
compared to 47.2% the previous month, while the average loan size in
July 2010 (£329,204) was 18.7% higher than in June 2010 (£277,448).
The London market has rebounded better than most UK regions since the
start of the year, and July 2010 saw a 13.4% increase in mortgage
applications compared to June 2010, albeit from a very low base.
The average age of a new mortgage applicant in London in July 2010 was 36.2 years, compared to 37.9 in July last year.
LONDON MARKET OVERVIEW:
Andrew Montlake, director, London-based independent mortgage
broker Coreco Group: “The London market has been buoyed in the past 12
months by an influx of foreign investors looking to take advantage of
the dual benefits of lower house prices and a cheap pound.
“However, despite stock levels nationally rising, estate agents in the
capital are still bemoaning a lack of good quality stock. It is this that we
believe will keep London house prices relatively buoyant in the coming
months. We are likely to see a stabilisation and levelling of house prices
in London rather than a drop.
“Although mortgage activity has picked up, with more products available
and more lenders returning to market, the mortgage landscape is by no
means close to returning to normal. In fact, post-Credit Crunch, the
market is still getting to grips with just what the new “normal” in
terms of mortgage activity actually is.
“Average loan sizes for purchases in London have increased substantially year on year from £232,637 in July 2009 to £281,504 in July 2010, which has reflected a recovery in London house prices driven mainly by a lack of stock.
“As expected, remortgage activity remains low in London and accounted
for just 20.8% of mortgages in July 2010. This is due not only to the
long period of record low interest rates, but also because, as mortgage
lending criteria have toughened, many people, specifically the
self-employed or those who purchased using high income multiples, are
unable to move from their current lenders.
“The even split between fixed and variable rate mortgages is a reflection of how borrowers, like many economists, are unsure of when the next base rate rise will come. However, we are urging caution and believe that the inevitable base rate rises will come sooner and be more dramatic than most commentators expect.
“There still appears to be a mentality among borrowers of trying to ‘beat the market’ and take low tracker products, when perhaps taking a longer, more cautious approach, and fixing now would be more advisable. Fixing in now for the medium to long-term, and paying slightly more, will prevent sleepless nights in the future.”
NATIONAL/REGIONAL MORTGAGE REVIEW:
Reflecting a gradual rise in lender confidence, the average loan-to-value
(LTV) on purchase mortgages has risen above 70% for the first time
since February 2010.
The average LTV on purchase mortgages increased from 67.5% in June
2010 to 71.1% in July 2010.
The average loan size for purchases also increased, up 6.7% from
£130,609 in June 2010 to £139,404 in July 2010, the highest average loan size since 2007, pre-Credit Crunch.
Average LTVs on remortgages rose from 53.8% in June 2010 to 55.6%
in July 2010, although average remortgage loan size fell 4% in the same
period, from £149,769 to £143,821.
Although lenders might be showing a little more confidence, that is not
the case with applicants when deciding whether to go with a variable or
fixed rate product.
Back in March 2010, variable products were the preferred choice among both purchase and remortgage applicants, with 53.9% choosing not to fix.
Now, only 38.8% of new mortgage applications are variable deals, as
buyers migrate to fixed rates, despite the general industry consensus that interest rates will stay low for some time.
On volumes of mortgages, there was a 1.3% fall in the number of
purchase mortgage applications made in July 2010 compared to June
2010. This compares to a 5% rise in application numbers in June 2010 on the month before.
Regionally, the average LTV on purchases arranged in July 2010 was
highest in East Anglia (78.7%) and lowest in the South West (64.3%).
The average age of mortgage applicants was highest in the South West
(40.1 years) and lowest in East Anglia (35.2 years).
NATIONAL/REGIONAL MARKET OVERVIEW:
Brian Murphy, head of lending, independent mortgage broker
Mortgage Advice Bureau: “Perhaps the standout finding in July is that borrower appetite for variable rate mortgages is waning and fixed rates are now the overwhelming choice. Nationally, we have seen fixed rate mortgages among house purchase customers increase from around 45% in January this year to more than 60% in July.
“Rising average LTVs, of 71.1% in July, are confirmation of growing
competition among lenders and a renewed appetite to lend. On a regional level, there is great variation in average LTVs across the ten regions, with average LTVs rising since the start of the year in three regions and falling in seven regions.
“East Anglia, for example, has seen the average LTV rise from 63.2% in
January 2010 to 78.7% in July 2010, while average LTVs in the South
West fell from 69.4% in January 2010 to 64.3% in July.
“Interestingly, all 10 regions have recorded an increased average loan
size over the year to date, increasing from £110,470 to £126,584, a rise
of more than 14%. Regional variances were more marked, with Wales
recording the smallest increase in average loan size (6%) and Greater
London the largest (29%).
“In terms of mortgage type, the South West has seen the percentage of
fixed deals increase from just 35.7% of all mortgages arranged in March
2010 to 59% of all deals in July 2010.
“In terms of the types of borrowers, the average age of house buying
customers has fallen marginally year on year from 38 to 37 years old.
Regionally, average borrower age has fallen in eight out of ten areas.
“At 36 years, the youngest customers are currently in Yorkshire and
Humberside and Greater London. The oldest, at 38 years, are in the West Midlands.”
Monty’s Mortgage Blog
11.01.12
2012: What does the future hold for the mortgage market?
In my mind 2012 was always meant to be the year when everything began to improve, after all we have the Olympics and the feel good factor from that together with a good Euro Championships would surely propel us on to bigger and better things?
Coreco
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