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Brian Murphy is head of lending at Mortgage Advice Bureau
Eurozone crisis hits
house buyers Brian Murphy has the latest on mortgage lending.
and re-mortgage activity did not increase month-on-month for the fi rst time this year, however compared to recent years, levels remain comparatively strong. Total applications year-to-date
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are up 16 per cent on the same time last year and purchase and re-mortgage activity was 19 per cent more than in April 2011. However, the total number of applications fell 13 per cent from March 2012. Defying commentators’
predictions, the fi rst quarter of 2012 saw applications increase month-on-month as a result of cautiously optimistic economic data and rising LTVs. First-time buyers, pushing on to beat the end of the stamp duty holiday, have added to it. However, more recently the eurozone crisis has meant funding costs have risen and accordingly, product numbers have dropped, criteria has tightened and rates have risen. With the fi rst quarter GDP fi gures offi cially recording that the UK has slipped back into recession, borrowers are naturally more wary about making any big decisions. Not only have we seen several
lenders increase their SVRs but average fi xed rate deals increased again in April. The average two-year fi xed rate deal was 4.27 per cent at the start of the year; in April this had risen to 4.60 per
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ctivity eased in April as Eurozone travails spooked borrowers. In April, purchase
are still well below pre-crisis levels at the end of 2007 when the Bank base rate stood at 5.5 per cent (fi ve per cent higher than it is now), and the average rate on a two-year fi xed rate mortgage was 6.6 per cent. It’s also important to note that
aff ordability remains strong, with average annual income as a percentage of deposit falling from 60.8 per cent in March to 58.2 per cent in April. This suggests that borrowers are still managing to put down increasing amounts as deposits for house purchase. The total number of mortgage
“The fi rst quarter of 2012 saw applications increase.”
cent – the highest level for two years. The average rate on a two-year tracker is also up signifi cantly on the start of the year, up from 3.5 per cent to 3.62 per cent – the highest level since January 2010. The average three-year fi xed rate stood at 4.84 per cent in April – from 4.53 per cent in January 2012 and average fi ve-year fi xed rate has risen from 4.61 per cent in January to 4.82 per cent (April 2012).
With rates seeming to move in
an upward direction, the number of applicants seeking fi xed rate mortgages not surprisingly remains fi rmly in the ascendency with more than three in every four (78.5 per cent at April 2012) electing to fi x. Once a couple of lenders begin to raise their rates then others tend to follow so we expect more to do so in the coming months. Nevertheless, the current rates
products available fell 3 per cent from March to stand at 7,400 in April. Intermediary product numbers fell by the same amount to 5,316. This reduction in product numbers demonstrates greater caution by lenders but although products numbers are but a fraction of the peak of the market in April 2007 when numbers totalled 77,966 they are still substantially more than the nadir of the market in August 2009 when a mere 3,158 deals were available. With fewer products available
for borrowers to choose from the role of mortgage advisers is more crucial than ever. The cost pressures on lenders forces some to deal with a reduced panel of intermediaries, therefore not every independent adviser can access every product in the market.
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