While remortgage applications fell by 1.9%, as many homeowners, with interest rates at an all-time low, chose to revert to their lender’s SVR rather than remortgage.
In terms of the type of mortgage people opted for, taking an average for the whole year, 58.5% of borrowers chose fixed rate purchase mortgages although at the start of the year the majority of borrowers were applying for variable rates (54.9%).
However, by Q4, fixed rate mortgages were the product of choice and December saw the highest percentage of fixed versus variable rate mortgages applied for (70.9%) since September 2009.
As expectation levels grow of an imminent rate rise, the balance of fixed versus variable is likely to shift even further towards fixed rate products in 2011, as borrowers no longer feel it is worth gambling on when — and by how much — interest rates will rise.
The availability of mortgage finance has remained constrained during 2010, reflected in an average purchase mortgage LTV of just 69.5%, although this is up slightly on 2009, when the average purchase LTV was 68.5%.
The average loan size in 2010 was £126,888 compared to £114,035 in 2009, an increase of 11.3%. With lenders reluctant to lend above 75%-80% LTV, borrowers applying for a mortgage in 2010 had to find average deposits of £38,701 to stand any chance of securing finance.
Although remortgage activity was subdued through 2010 as a whole, there were signs at the end of the year that the remortgage market was starting to awaken from its slumber. Of all remortgage applications processed, the average LTV was 53.8%, with 54.3% of those being fixed mortgages. The average loan size of remortgage applications was £143,174.
The average age of a purchase mortgage applicant in the UK in 2010 was 37 years 5 months.
REGIONAL MORTGAGE REVIEW:
Across the regions during 2010, there was a significant variation in average LTVs, loan sizes and the ratio of fixed versus variable rate purchase mortgage applications.
Almost three-quarters (73.5%) of applicants in East Anglia chose fixed over variable rate purchase mortgages in 2010, compared with just 55.4% of applicants in Wales choosing fixed rate deals (excluding London – see London Review).
Average LTVs on purchase mortgages in 2010 were highest in the North and Yorkshire & Humber (73.6%) and lowest in the South West (65.4%), while average loan size (excluding London) was highest in the South East at £167,131 and lowest in the North West at £92,291.
For remortgages, more than two thirds of borrowers (67.9%) in East Anglia chose fixed rate deals during 2010, compared to only 48.4% of borrowers in Yorkshire & Humber. The average LTV on remortgage applications during 2010 was highest in East Anglia (61.8%), and lowest in South East (52%).
The oldest purchase mortgage applicants in 2010 were in the South West, averaging 38 years 4 months, while the youngest were in Yorkshire & Humber, averaging 36 years 3 months.
NATIONAL/REGIONAL MARKET OVERVIEW:
Brian Murphy, head of lending, UK-wide independent mortgage broker, Mortgage Advice Bureau, said:
“The increase in mortgage applications, albeit from very low levels, has been helped by a renewed appetite by lenders to lend. However, the majority of products on the market are at LTVs below 75%, which means applicants will still need to be putting up substantial deposits to secure mortgage finance.
"But it is a step in the right direction, with almost 50% more mortgage products on the market at the end of 2010 than were available at the beginning of the year.
“Unfortunately, mortgage product availability remains constrained at higher loan to values and this is certainly hampering a full blown recovery. Lenders also continue to be extremely cautious with regards to who they lend to, and we don’t expect to see any relaxation of lending criteria anytime soon.
“With national property prices effectively at the same level at the end of 2010 as they were at the end of 2009, and the forecasts for a flat or slight reduction in overall prices in 2011 due to concerns around public sector employment prospects, consumer confidence at a lower ebb and a limited amount of property coming onto the market, 2011 will be another challenging year for the mortgage market.
“Having witnessed a slightly more active month in November than might have been anticipated, the mortgage market during December went into something of a mini hibernation period in the second half of the month.
"This was a consequence of both the seasonal festive break and the near arctic conditions effectively shutting down large swathes of the country. In spite of this, activity levels were only down around 6% compared to December 2009, when buyers were rushing to beat the end of the Stamp Duty holiday.
“During December, those buyers who did venture into the house purchase market borrowed slightly larger mortgages and at slightly higher loan to values than those in November. There was also a further migration by buyers away from variable rate products, with more than 70% of applicants choosing fixed rate products.
“With average rates on two and five-year fixed deals edging up slightly in December compared to November, and with comments from organisations including the Confederation of British Industry (CBI) that they expect interest rates to start to rise possibly as early as the second quarter of 2011, it is not surprising to see that active buyers are taking advantage of some terrific fixed rate deals rather than playing a wait-and-see game.”
LONDON MORTGAGE REVIEW:
Although the total number of m
