by Mark Johnston
Borrowers are starting to be attracted back to fixed rate deals instead of staying on their standard variable rate (SVR). Since the record historic lows in interest rates, manay borrowers who have ended their mortgage term have choosen to remain on cheaper variable rate mortgages.Reports now show almost 50% of new borrowers are taking out fixed rate mortgages instead of variable, tracker or discount alternatives. This is the highest level so far in 2010 according to the reports producing CML.
Many believe that fixed rate mortgages have fallen in popularity this year because of the Bank of England base rate being at a historic low. In comparison, previous years the base rate has been much higher which has led many borrowers to fix their mortgage rates to provide some security in the amount they repay each month.
Lenders are desperate to push their fixed rate products and have started to reduce their prices in a bid to attract new business. This is casing the average price of a fixed rate mortgage to fall which means that these types of mortgages are becoming more attractive.
The report publisher CML shows that the overall number of houses bought in the UK in May 2010 has increased significantly to around 52,000 which is an increase of around 20%. The value also increased but 23% which equates to roughly £7.6 billion. The following month in June 2010 also saw an increase of 14% in the total volume of purchases and again an increase in the value of almost 27%.
The remortgage market, where borrowers are looking to stay in their home but take out a new mortgage didn’t fair as well. Remortgages only saw a 6% increase in June which equates to around 27,000 mortgages worth around £3.5 billion, where as May’s figures were only 26,000 but this was still down on the same time last year in 2009 but when looking longer term is the twelfth month that lending has been much higher then the same period in the previous year.
In quarter two there were 136,000 mortgages taken on homes in the UK worth a staggering £19.7 billion. That figure is a 20% increase by both value and volume than the previous period. Looking at re-mortgages in the same way, only a 2% increase between one quarter and the next was recorded even though re-mortages totaled 77,000 worth an estimated £9.6 billion.
The number of first time buyers were up in june by 20% when compared against May 2010 figures. The total number of first time buyer mortgages was 19,400 which totaled £2.4 billion. This was a healthy 12% increase on the same period of June last year and over a 25% rise in value.
Paul Samter, economist at the CML, said: “For the time being, the effects of government spending cuts have yet to make an impact on mortgage demand, and activity continues on its upward trajectory.
“But we still expect house purchase activity to be muted in the coming months. Both consumer demand and lending capacity remain distinctly difficult to call, especially in the light of the government’s austerity measures and their possible impact.”
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