Broken down, the proportion of lending to first time buyers increased by 0.1 percentage points to 21.8% in Q4 2014, however the value of residential loans advanced to first time buyers decreased over the quarter to £11.2 billion. The proportion of gross advances at over 90% LTV decreased by 0.5 percentage points over the quarter to just 3.8% in Q4 2014.
Brian Murphy, Head of Lending at Mortgage Advice Bureau, commented:
“Mortgage affordability is certainly swinging in consumers’ favour. However, for those with small deposits, there is definite room for improvement. The proportion of gross advances at a loan-to-value of over 90% fell to just 3.8% in Q4 2014. While the Help to Buy scheme has helped to prop up higher LTV lending, it continues to be underrepresented in the market. More lenders need to expand this area of lending to ensure the housing ladder is not out of reach for lower income first-time buyers.”
On the other hand, buy-to-let lending increased from 14.3% in Q3 2014 to 14.9% in Q4 2014. There was also an increase in value terms over the past year – from £6.6 billion advanced in Q4 2013 to £7.6 billion in Q4 2014.
The proportion of remortgages increased to 23.7% in Q4 2014 from the series lowest of 23.0% in Q3 2014.
The proportion of other new lending (including lifetime and equity release mortgages) decreased from 3.0% in Q3 2014 to 2.9% in Q4 2014.
The data also found that the proportion of fixed rates decreased for the first time in over two years, from 82.6% in Q3 2014 to 82.2% in Q4 2014.
The overall average interest rate decreased by 5bps in Q4 2014 to 3.26%, only 2bps higher than the series lowest interest rate of 3.24% in Q1 2014. Average fixed rates decreased by 6bps to 3.37%, while variable rate loan average rates dropped by 5bps to 2.74%.
The overall average interest rate on total amounts outstanding decreased by 3bps to 3.25% in Q4 2014, the lowest since the series began in 2007. This was due to the decrease in the average interest rate for fixed rate balances of 6bps to 3.48% and to the decrease in the average interest rate on variable rate balances of 2bp to 3.08%.
Brian Murphy continued:
“While mortgage lending was sluggish in the final quarter of 2014 – when gross advances fell 8.1% compared to the previous quarter – the market is geared towards greater activity in 2015, particularly in terms of consumer demand. The average interest rate on total amounts outstanding has fallen to its lowest point in over seven years, and consumers continue to be the winners of the mortgage price war.
“In a low rate environment – and with a base rate rise pushed further back on the horizon – borrowers are increasingly willing to take on variable rates, with the proportion of advances at fixed rates falling for the first time in over two years. However, rates will eventually hit the bottom of the curve so timing is crucial: failure to lock in to today’s record low rates could prove costly in the long-term.
Adrian Gill, director of Your Move and Reeds Rains estate agents, added:
“The lending landscape has been extensively re-shaped in the past year, and fresh regulations and affordability checks have cultivated a much healthier mortgage market. Mortgage approvals may take longer to come to fruition, but buyers are benefiting from a more thorough and considered borrowing process. In the longer term, providing customers with the most suitable mortgage product for their needs is of paramount importance.
“Front-end demand is beginning to blossom in 2015, as consumer confidence grows. Slashed stamp duty fees and more gradual house price growth are bringing homeownership closer within reach of aspiring buyers, while at the same time rock bottom inflation and competitive mortgage deals are giving borrowers a boost. Buyers are finding brilliant deals on homes, and this front-end sales activity will soon trickle down to completions, feeding the property recovery.”
