Home mover loans up as fixed rate gold rush takes hold

Data from the Council of Mortgage Lenders showed 83,500 loans were advanced to home movers , an increase of 27% on the first quarter of 2013 and a 4% rise on quarter two last year.

And while home mover advances rose, interest rates have continued to fall resulting in a record take-up of fixed rate deals in June representing 86% of all mortgages, the highest level of fixed rate uptake for at least 20 years.

Paul Smee, director general of the Council of Mortgage Lenders, said: "With increased interest in home buyers ability to cope with the eventual rise of interest rates it is particularly reassuring to see borrowers choosing to fix their payments and for longer in record numbers."

Overall the house purchase sector continued to outperform the remortgage market propping up total gross lending in June and the second quarter as a whole.

A total of 151,600 loans was advanced for house purchases in the second quarter up by 30% compared to the first quarter of 2013 and 17% compared to the same period last year.

In June £8.5bn worth of house purchase loans were advanced which was an increase of 16% compared to June last year.

Remortgage lending dipped in June but growth in the first two months of the quarter resulted in an increase in the second quarter compared to quarter one.

Remortgage lending continued to trend above last year’s levels, based on both the second quarter and the June total, although it remained subdued compared to historical levels.

Meanwhile the Funding for Lending Scheme helped stem the upwards pressure on rates seen through the first half of 2012.

Rates continued to show a downward movement in June with fixed rates falling to 3.40% on average. This is well below the 4.25% recent peak last August and somewhat below the previous recent low of 3.69% at the end of 2011.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Average fixed rates are significantly lower across 2, 3 and 5-year products than they were this time last year, and the latest data showed average 5-year fixed rates at 3.83% – the best we have seen in recent memory.

“The Bank of England has signalled that interest rates are likely to favour mortgage borrowers for the foreseeable future but with rates this good fixing still looks like the most appealing option for long-term security.”

Murphy said the range of borrowing options is likely to improve further as lenders, armed with cheap funding from the FLS, are primed for a busy end to the year chasing “ambitious” targets.

Ben Thompson, managing director of Legal & General Mortgage Club, said: “It is clear from these figures that the market is starting to re-build from the bottom up, something which we consider to be a very healthy state.

“The decline in rates has been ongoing for some time now due in part to Government stimulus including the Funding for Lending Scheme and the Help to Buy scheme.

“What we’re starting to see currently is an opening up of higher loan to value mortgages making products more accessible.”

But Thompson said despite the good news there is still more to be done.

He added: “The shortage of new houses being built needs to be tackled which will also help to control house price growth.

“Furthermore stamp duty remains a barrier to both entering and moving up the property ladder.

“Once we see an improvement in these areas more borrowers will be able to take advantage of the great mortgages on the market.”

Andrew Baddeley-Chappell, Nationwide’s head of strategy and policy for mortgages and savings, added: “The rise in first time buyers in June provides further evidence of rising confidence in the housing market and improving availability of mortgage finance.

"First time buyers are important to the wider market as they provide fuel to power it and oil to help it to work efficiently. The CML data shows the number of home loans advanced to first time buyers was up by 30 per cent on the year. These are still early days; however the combination of increasing activity and modest increases in house prices does suggest that the market is entering a new phase.

“In the financial year ended 5 April 2013 Nationwide increased the number of mortgages it extended to first time buyers by 75%. Over that period the Society accounted for almost one in five first time buyers in the UK.

“The picture suggests that first time buyers are increasing confident about committing to buy, but that there are areas of the country where they may have less of a choice about where to live because prices remain relatively high.

"The solution to the challenge of high house prices is an increase in the supply of new homes. It is important therefore that in these areas an increased willingness to buy is supported by an increased supply of new homes.”