The growth was driven by fixed rates falling for a ninth consecutive month, prompting 80% more consumers to choose fixed deals compared to April last year. Fixed rate deals have now been the product of choice for more than nine in ten borrowers every month during 2013, having reached this level of popularity just once in the previous 36 months.
An influx of purchase customers helped to boost activity levels in the market during April. While the total volume of applications was up by 10% from March and by 54% year-on-year, performance was even stronger in the purchase arena.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index shows 13% more activity from purchase borrowers compared with March and 60% more than in April 2012. In comparison, monthly remortgage business registered a marginal 1% increase, bringing the overall year-on-year growth to 38%.
Despite figures from the Council for Mortgage Lenders indicating more first-time buyers accessed 90%-plus loan to value mortgages in the first quarter of 2013 than the four previous years, there has been little overall change in the typical purchase deal sought over the last year.
The average purchase LTV in April 2013 was less than 1% higher than April 2012, with the typical borrower putting down a comparable deposit and taking out a similar-sized mortgage. Although the average homebuyer in April 2013 was slightly younger than the same time last year, they enjoyed an annual income that was 8% higher on average.
In fact, the figures show that after three years of improving LTI ratios for homebuyers, the trend has reversed with lenders advancing less funding relative to homebuyers’ income in April 2013 than 12 months before.
Despite falling rates and government initiatives – such as the Funding for Lending Scheme and the fledgling Help To Buy scheme – this suggests greater demands on homebuyers with regard to their level of income and highlights the challenge facing the industry in widening access to the property ladder.
The arrival of the Help To Buy equity loan scheme alongside New Buy has coincided with a rise in the share of mortgage products available through brokers.
Having accounted for 70% of all products in February 2013 – the same as in August 2012 when the FLS launched – almost three in four products (74% among a total of 9,139) are now available through the intermediary channel.
Potential homebuyers will also be encouraged by the continuing drop in fixed rates: average two year rates fell by 0.77% to 3.83% in the twelve months to April 2013; three year rates dropped by 0.67% to 4.17%; and five year rates fell by 0.82% to 4.00% - the first time they have reached this level since MAB began tracking this data in June 2007.
Brian Murphy, head of lending at Mortgage Advice Bureau, comments:
“The government has made a bold statement about its desire to create wider access to mortgage loans and shift activity up a gear. By pushing property back into the spotlight, it has helped draw attention to some of the deals that are already out there which, in the case of five year fixed products, are the best that we have seen since the recession.
“What comes next in the development of Help To Buy will determine just how many people can join the rush to secure a good deal on property, whether or not they are first-time buyers or second-steppers. We are still waiting to see how the mortgage guarantee will work in practice, but in the meantime the competition between lenders means there is plenty of reason to shop around and seek advice to secure a favourable offer.”
