This is the highest proportion since Paragon launched the FACT Index in 1996. The proportion of repayment mortgages was up from 71% recorded during the final quarter of 2010 and has been rising since the third quarter of 2007 when it hit a six-year low of 57%.
Conversely, interest-only continued its downward trend. Just 14% of mortgages introduced during the quarter were interest-only, the lowest proportion since the first quarter of 2004 and down from a high of 28% recorded during the third quarter of 2007.
John Heron, Paragon Mortgages Managing Director, says:
"FACT shows that residential mortgage lenders have been clamping down on interest-only since the start of the credit crunch and the decline of this market shows no signs of slowing down.
"The Financial Services Authority signalled the demise of interest-only through changes proposed in the Mortgage Market Review and it appears that lenders are positioning their businesses in anticipation of regulatory changes."
The FACT Index also revealed:
Level of mortgage business
Mortgage intermediaries reported a strong increase in the number of residential mortgage applications submitted during the quarter. Paragon Mortgages' research shows that the average number of mortgages introduced per office was 15.7 during the first three months of the year, up from 14.7 in the final quarter of 2010.
Looking forward, intermediaries expect to introduce a greater level of mortgage business during the second quarter of the year.
On average, intermediaries expect to do 5% more business during the period than they did in the first quarter. FACT shows 16% of intermediaries are forecasting a business increase of more than 10%, with 17% pencilling in an increase of between 6% and 10%. Just 6% of intermediaries forecast a fall in business levels.
Borrower type
FACT also showed there was a sharp increase in the proportion of residential mortgage borrowers remortgaging during the first quarter of the year, which could be prompted by speculation of an imminent interest rate rise.
Nearly half (45%) of residential mortgage applications submitted via intermediaries during the period were for remortgage purposes, up from 38% in the fourth quarter of 2010 and the highest figure since the second quarter of 2009.
Conversely, the proportion of house movers is down from 31% to 26%, whilst first-time buyers increased from 15% to 18%.
Interest rate type
A sharp fall in the average proportion of tracker mortgages (46% in Q4 2010 to 37% in Q1 2011) and increase in fixed rate cases (49% in Q4 2010 to 59% in Q1 2011) supports the argument that borrowers are anticipating an interest rate rise.
Heron added:
"A number of positives emerged during the quarter - there was a solid improvement in the number of mortgages introduced during the period and it is encouraging that intermediaries believe business levels will rise further during the second quarter.
"Meanwhile, it is clear that residential borrowers are starting to position themselves for an increase in interest rates and are taking precautionary action."
