Mortgage News
Repayment deals hit record high
The proportion of residential mortgages taken out on a capital repayment basis reached 77% in Q1 2011, according to Paragon Mortgages.
This is the highest level Paragon has ever recorded since it began its Financial Adviser Confidence Tracking (FACT) Index in 1996.
Repayment deals were up from 71% in Q4 2010 and have been rising since the third quarter of 2007, after reaching a six-year low of 57%.
By comparison, interest-only mortgages continued their downward trend, accounting for just 14% of mortgages introduced in Q1. This was the lowest proportion seen since the first three months of 2004 and down from a high of 28% in Q3 2007.
John Heron, managing director of Paragon Mortgages, said that the decline of interest only shows no signs of slowing as lenders continue their clampdown. He said: “The FSA 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.”
Meanwhile, the average number of mortgages introduced by intermediaries to Paragon increased to 15.7 in the first quarter, compared to 14.7 for the same period of last year. Brokers also expect that business will pick up in Q2, forecasting they will do on average 5% more business than in Q1.
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Remortgages saw a sharp increase in Q1, accounting for 45% of residential applications from brokers in Q1 compared to 38% in Q4 2010 and the highest figure since Q2 2009.
Meanwhile, house movers fell from 31% to 26%, while first-time buyers increased from 15% to 18%.
In addition, borrowers continue to anticipate a rate rise, with a sharp fall in the proportion of tracker mortgages and rise in fixed rate deals.
Tracker deals fell to 37% in Q1 compared to 46% in Q4 2010, while fixed rate mortgages accounted for 59% of cases compared to 49% the previous quarter.
Heron said: “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.”
He added: “It is clear that residential borrowers are starting to position themselves for an increase in interest rates and are taking precautionary action.”