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Brian Murphy is head of lending at Mortgage Advice Bureau


Mortgage activity fluctuates, after the year’s ‘high’ in May


Brian Murphy on increases, decreases and a little hope! A


pplications for purchase and remortgage borrowing in June were down by


3 per cent on the start of the year, making it the slowest month of the year so far. This slowdown was not unexpected as a succession of factors combined to impact on activity: The main reason was the Jubilee celebrations and the extra bank holidays which saw many people take advantage of this and take a full week off. This meant we had fewer trading days than in the previous month. Exacerbating this was the atrocious weather which kept people indoors. And running in the background has been the impact of worsening economic conditions that have caused the UK to slide back into recession. However, while June saw a


slowdown, the total number of mortgage applications to year-to-date in 2012 is still 6.9 per cent higher than at the same time in 2011. And despite the dip in activity there were a number of other mortgage trends that have continued to develop. Product pricing has been rising steadily this year, with average short-term rates still moving up month-on-month. Back in January the average two-year fixed rate mortgage was 4.27 per cent, but in June this had risen to 4.72 per cent - the highest for over two years. The average three-year fixed rate was up from 4.53 per cent to 4.96 per cent in June, and the average five-year fixed rate was 4.9 per


www.thenegotiator.co.uk And with the size of the Average Mortgage Rates - Jun 11 - May 12 0.06


0.055 0.05


0.045 0.04


0.035 0.03


Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Average 2 year fixed Average 3 year fixed Average 5 year fixed


“The Funding for Lending scheme might just help.”


Purchase LTVs and Deposits - Jun 11 - May 12


100% 90% 80% 70% 60% 50% 40% 30% 20%


average purchase mortgage increasing every month in 2012 from £138,345 in January to £148,802 in June (a rise of 7.6 per cent) it suggests there is a medium-term trend towards a tightening of criteria by lenders. While some lenders have hit the headlines with some very low rates on higher LTV products recently, the indications are that in the short-term the trend will continue towards higher rates and tighter lending criteria. It is hard to accurately predict


what will happen from month to month and mortgage application levels are not following historic patterns at the moment. We expect the summer months are likely to be fairly steady, with a drag from the Olympics in London and the holiday period, before picking up again in the Autumn. There are some positive


Average Deposit - % Purchase Average LTV - %


cent in June from 4.61 per cent in January.


Loan-to-values (LTVs) on


purchase applications have now fallen every month this year, and the average LTV has fallen to 68.2


per cent in June from 72 per cent in January. At the same time the average deposit on applications has increased from £55,167 in January to £66,512 in June – an increase of 18.4 per cent.


indicators which lead us towards this as the most recent figures from the IMF and the ITEM Club among others suggest we will return to growth in the second half of the year. And notwithstanding a catastrophic implosion within the Eurozone, there are some positive signs emerging in the domestic market. The recently announced Funding for Lending scheme by the Bank of England could inject up to £80bn in the lending market, and we hope that lenders will look to utilise some of this extra funding within the UK mortgage market to help free up the pent up demand that exists.


TheNegotiator l September 2012 l 19


Jun-11 Jul-11


Aug-11 Sep-11 Oct-11 Nov-11 Dec-11


Jan-12 Feb-12 Mar-12


Apr-12 May-12


0.713 0.691 0.714 0.718 0.697 0.716 0.698 0.72


0.718 0.705 0.698 0.684


0.287


0.309 0.286 0.282 0.303 0.284 0.302 0.28


0.282 0.295 0.302 0.316


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