This reflects borrowers' appetite for fixed rates when they are priced at competitive rates. Average new fixed interest rates fell from 4.52% in April to 4.21% in May. The fall in variable interest rates was less significant from 4.14% to 4.10%.
The CML figures show total gross mortgage lending to remain very strong, fuelled mainly by remortgaging. Gross advances totalled £21.5 billion in May, up from £20 billion in April and £20.3 billion in May last year. Remortgaging accounted for 51% of all lending and totalled £10.9 billion, compared with £9.8 billion in April and £6.9 billion in May 2002.
Loans for house purchase increased to £8.8 billion in May from £8.4 billion the month earlier, and now represents 41% of all lending. However, it remains significantly lower than the level seen in May last year, when loans for house purchase totalled £12.1 billion and accounted for 60% of mortgage business. The proportion of mortgages taken out by first-time buyers fell to 30% last month compared with 33% in April and 37% a year earlier.
Commenting on the figures, CML Director General Michael Coogan said: "A reduction in the price of short-term fixed-rate mortgages has resulted in a significant increase in the popularity of these products in recent months. This clearly shows the price sensitivity of UK consumers, and that borrowers will opt for fixed-rate products if they are competitive.
"However, the current pricing of short-term fixed rate mortgages is being helped by expectations of interest rate reductions. It is unlikely that the market can deliver long-term fixed-rate mortgage products that are attractive to UK consumers, as the Chancellor of the Exchequer has advocated, without the introduction of significant Government incentives to encourage borrowers to take them out."