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Brian Murphy is head of lending at Mortgage Advice Bureau
Activity bounces back as borrowers seek security
Brian Murphy on rising rates and tighter criteria. A
fter a strong start to the year mortgage activity slowed in April before increasing again in
May, and climbing to its highest level this year. After four months of successive growth, the pause in April was largely as a direct result of a combination of the end to the Stamp Duty exemption and the long Easter holiday. Similarly, May’s transaction
fi gures for both house purchase and remortgage ‘bounced back’ to their highest levels since September and October 2011 respectively as mortgage rates continued to rise and borrowers sought to lock in to fi xed rates and protect themselves from increasingly expensive repayments. More than three- quarters of applicants (75.9 per cent) opted for fi xed-rate deals in May, demonstrating that borrowers seek the comfort of knowing their repayments will not keep rising in the short-term. Mortgage rates have been
rising for more than half a year now, as lenders react to higher borrowing costs and capital adequacy requirements. As a result, the average two-year
“May’s figures were highest since 2011”
fi xed-rate mortgage has risen month-on-month since September last year, with the average three- and fi ve-year fi xed rates having risen since December. With more lenders tightening their lending criteria and increasing their standard variable rates recently it has pushed borrowers – particularly remortgage borrowers – to try and lock in to lower rates and keep payments down. As a result, mortgage applications for remortgage business in May
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September. The event is open to personal and corporate members of or other divisions of the National Federation of Property Professionals (NFOPP). Entrants should be novice auctioneers who
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TheNegotiator ● August 2012 ● 19
were 21 per cent higher than they were at the same time last year, and applications for purchase business were 12 per cent higher. On purchase applications the
average loan-to-value has been on a downward trend this year, falling to 68.4 per cent in May from 72 per cent in January. With the average deposit on applications going the other way and increasing in 2012 (from £56,167 in January to £65,089 in May) and with average borrower income up two per cent on the year to £36,030, this indicates
that the typical borrower for purchase business is wealthier and more likely to have a sizeable deposit than they would have had at the start of the year. In the current market
conditions, borrowing costs are likely to continue to fl uctuate. The result of this is likely to be
that borrowers’ sentiment is likely to change from month to month, and with a smaller mortgage market where activity levels are still depressed any movement is likely to be amplifi ed. Looking forward we have the holiday season and the London Olympics which are likely to be a drag (for business at any rate), but at the same time we also have a new (yet to be fi nalised) initiative from the Bank of England designed to boost lending to consumers to businesses and consumers. Therefore, in the second half of
the year we expect to see activity and application levels continue to fl uctuate from month to month as a result of external factors, although we fi rmly believe the long-term trend is positive. New initiatives to boost lending will fi nd a receptive audience and pent up demand. ●
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