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Fixed rate deals favoured by 60% of buyers in 2010

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  • 13/01/2011
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Fixed rate deals favoured by 60% of buyers in 2010
Almost 60% of buyers opted for a fixed rate purchase mortgage during 2010, with more buyers expected to choose the product this year, new research shows.

According to the national mortgage index, conducted by Coreco and the Mortgage Advice Bureau, fixed rate deals became increasingly popular as borrowers became less keen to gamble that interest rates will hold.

The index also showed that overall mortgage applications increased by a third (33.2%) in 2010 compared to 2009, while remortgage applications fell by 1.9% as homeowners chose to revert to their lender’s SVR instead.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “With average rates on two and five-year fixed deals edging up slightly in December compared to November, 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.”

The index also showed that the availability of mortgage finance remained relatively constrained in 2010, reflected in the average purchase mortgage loan-to-value (LTV) of 69.5%, although this is up from 68.5% in 2009.

Murphy added that while there was nearly 50% more mortgage products on the market in Q4 2010, compared to Q1, lower LTV deals below 75% are still forcing buyers to stump up larger deposits.

“Unfortunately, mortgage product availability remains constrained at higher LTVs and this is certainly hampering a full blown recovery. Lenders also continue to be extremely cautious with regards to whom they lend to, and we don’t expect to see any relaxation of lending criteria anytime soon.”

Borrowers applying for a mortgage in 2010 had to find average deposits of £38,701 to stand a chance of securing a loan on their property.

Although remortgage activity was subdued through 2010, the index revealed remortgage activity remained low in Q4 2010.

Of all the 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 last year was 37 years-old.

Meanwhile, mortgage applications in London almost doubled last year, up 88.6% compared to 2009, while the average purchase mortgage loan size increased by 18.4% from £217,419 in 2009, to £257,491 in 2010.

Andrew Montlake, director of independent broker firm Coreco, said that the market would see more regional differences in house prices and mortgage activity this year, with London and the South East leading the way on both.
 
He said: “Low stock levels should provide support to prices, with agents still reporting for good quality products. Interest from foreign buyers will also continue to support the prime areas of London.”

 

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