At 3.96% the average 5-year fixed rate for the month dropped below 4% for the first time since MAB’s records began in June 2007 and was 0.9% better than the same time last year.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “As recently as two years ago the idea that 5-year fixed rates would average less than 4% was absurd.
“Now we’re looking at a situation where five year rates have fallen every month this year and product numbers keep on climbing as lenders compete for business across the loan to value range.”
The difference adds up to a fixed term saving of over £4,700 for any borrower who took out the average 5-year fixed mortgage in May compared with May 2012 and a saving of over £13,000 compared with June 2007.
Average two and three year rates also hit record lows in May 2013 at 3.82% and 4.13% respectively.
Murphy said: “Low rates are a real pick-me-up in the face of rising housing prices with some lenders also willing to pay the stamp duty for first-time buyers. Applications are consistently growing each month and concessions like this are a welcome tonic as the market continues its modest recovery.”
The percentage of homebuyers choosing fixed rates has jumped from 76% to 92% in the last 12 months.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index shows a similar change in remortgage applications: 89% were for fixed deals in May 2013 compared with 72% in May 2012.
Homebuyers have driven the surge of activity in recent months with purchase applications during May 2013 up by 43% year-on-year compared with a 20% increase in remortgage applications.
Almost three quarters of all mortgage applicants were potential buyers in May 2013 (74%) up from 71% in May 2012 as the growing momentum behind the Help to Buy scheme fuelled a surge of consumer interest in house purchases.
Competition from lenders has had a positive impact on rates across the LTV range over the last year. The average purchase LTV of 71.4% in May 2013 was 3% higher than the same time in 2012.
As a result, although deposit requirements grew month-on-month from April, the typical homebuyer saved over £1,300 on their deposit in May 2013 compared with May 2012.
Purchase prices have increased in that time reflecting the 2.6% annual growth to April 2013 in the latest house price index from the Office for National Statistics.
MAB’s figures show the typical home buyer applied to borrow £6,600 more for their mortgage in May 2013 than the same time last year.
And consumers benefitted from a 6% leap in the number of mortgage products offered during May whether or not they chose to use brokers or go direct to lenders.
May saw an average of 7,177 intermediary products available compared with 2,541 direct-only products.
Over two thousand more products were available in total compared with May 2012. The total for May 2013 has only been bettered twice since MAB’s records began in April 2009.
Murphy said: “Current activity is especially strong in the new build sector where Help to Buy is providing an answer for many buyers with limited deposits.
“Competition is set to get more intense over the summer as more lenders spot the potential for growth in the market for new build properties.”