Borrowers opting for fixed rates

This is according to the latest National Mortgage Index compiled by Mortgage Advice Bureau.

Just 12 months ago, the picture was an entirely difference one, according to MAB. In January 2010 less than half (45%) of borrowers applied for fixed-rate mortgages. However, the levels are still significantly down on March, April and May of 2009 when more than 90% of applicants chose fixed rate deals.

In January 2011 the average LTV on mortgage applications was 72%, compared to 70.9% in December 2010. Although, securing mortgage finance at loan-to-values above 80% is the exception rather than the norm, there has been a noticeable increase in the availability of higher LTV products in the past three months. This is clearly having an impact on the average loan-to-value levels on mortgage applications.

The average loan size on mortgage applications in January 2011 was £128,887 compared to £120,881 in January 2010, an increase of 6.6%, and numbers of mortgage applications in January 2011 were up by 23.3% on December 2010 and 18.4% on January 2010.

On the remortgage front, there has been a clear uplift in activity since the end of 2010, and despite a predictably quiet December, January 2011 saw remortgage applications back up to pre December 2010 levels.

Commenting, Brian Murphy, head of lending, independent mortgage broker Mortgage Advice Bureau, said: “Not surprisingly January saw borrowers migrate to the safety that fixed rate deals offer. With a variety of fairly negative economic news, rising inflation and an increase in unemployment levels, borrowers who are active in the market, are erring on the side of caution and increasingly opting to fix their repayments. Furthermore fixed rate deals still offer extremely good value relative to historic levels and therefore we are seeing more people taking advantage of current pricing.

“In recent weeks we have witnessed lenders re-pricing many products, with some reductions, but on the whole rates have risen in February from last month’s levels, partly in response to the pricing of swap rates and lenders taking the opportunity to both curb demand and make a little more margin. With Base rates being held yet again it appears that the worry some borrowers have is that the longer the BOE hold off from raising rates the more significant the increase may be as and when it comes.”