A fall of over 0.5% in average fixed rates under the Funding for Lending Scheme (FLS) helped to boost remortgaging activity last month, according to February’s National Mortgage Index from Mortgage Advice Bureau (MAB) – the UK ’s leading independent mortgage broker.
The highest average remortgage loan to value (LTV) recorded since January 2009 coincided with a 17% monthly increase in applications, according to MAB.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index shows how the rise in activity has been fuelled by the continuing drop in fixed rates, with average two, three and five year rates each falling by 0.11% or more since January.
FLS Influence – Exploring the Rise in Remortgage Applications
Average three year rates have now fallen for six successive months (5.02% – Aug 2012 vs. 4.36% – Feb 2013). Since the FLS was introduced in August 2012, average fixed rates have fallen by more than 0.5% across the board: two year rates have shed 0.57% to 4.11%; three year rates are down by 0.66% to 4.36%; and five year rates have plummeted by 0.73% to 4.14%.
Unsurprisingly, the popularity of fixed rate remortgage applications in February remained stable at 91.7%: the highest figure ever recorded by the Index when it first appeared in January 2013. Lenders’ willingness to permit higher LTV borrowing also saw the average remortgage LTV hit 62.1% – up by almost a full percentage point since January and by over five percentage points since the FLS began.
Evolving Mortgage Landscape – Brokers’ Role and Challenges
Growing competition in the market is also creating more choice for consumers as lenders compete for volume. The total number of mortgage products was 4% higher in February 2013 than the previous month, and 5% higher since the turn of the year– passing 9,000 for the first time since December 2011 to reach 9,107.
This monthly increase was largely down to a 13% rise in the number of direct products available, with an extra 307 products appearing to take the total to 2,734. However, intermediary products have behaved the most consistently in recent times, with a 1% increase making February the tenth consecutive month where numbers have risen to their current level of 6,373 (the highest since January 2012).
Brian Murphy, head of lending at MAB, said: “Remortgaging in the current climate is not just a practical move but one that makes increasingly good financial sense. In simple terms, we have never seen fixed rate usage so high. With so little to choose between two and five year rates, more people are also opting for longer fixed terms as the fees on some shorter deals outweigh any differences in rates.
“Where products are concerned, the picture is changing on an almost daily basis, with lenders pricing to attract borrowers’ interest and reacting to the growing rate war. On current form, a new product that appears to be a market-leading offer can be overtaken in as little as 24 hours.
“Brokers will be crucial to increasing lending volumes over the next few months, as smaller lenders are limited by the reach of their branches and staffing resources.”
Article courtesy of Property Investor Today“”
