Mortgage advisers are confident about the future

This is the main finding of the March 2003 edition of Paragon Mortgages’ Financial Adviser Confidence Tracking Index survey.

Despite advisers reporting a 14% fall in the number of mortgages introduced in the first quarter of 2003, 93.6% of advisers surveyed project the same or higher levels of business next quarter and only 6.4% expect to see a contraction.

The number of mortgages arranged for first time buyers has dwindled steadily, accounting for only 12% - compared with 14% last quarter and 19% in late 2001. Plus, with lower homebuying activity, the mix of reasons for borrowing shifted marked towards remortgaging, with (for the first time) more than half (52%) of loans taken out as a remortgage. While the most commonly cited reason for remortgaging was for cost minimisation (mentioned by 41% of the total), many homeowners are clearly taking advantage of low interest rates and high levels of equity to raise additional finance. Of this category, home improvements were the most important reason (24%), while consumer spending and investment in second properties amounted to 16% and 15% respectively.

In the low interest rate environment, base rate tracker mortgages are now the most popular, accounting for 32% of all loans, and fixed rate gained significantly in popularity, up from 25% to 29%. At the same time, discount rate products saw falling popularity – down from 37% to 32%. The increased popularity of tracker rates suggests consumers are starting to believe that low interest rates are set to continue in the long term.

In terms of repayment type, capital & interest has consistently remained the favoured method by 70% of borrowers, and interest only representing around 13%.