Market View

The latest press release from the Council of Mortgage Lenders tells us that the mortgage market is stabilising but is not yet normal. No Nobel Prize for that gem you might think, but there were some interesting facts further into the release.

The number of mortgages taken out for both house purchase and remortgaging increased in June, and while the total of purchase mortgages for the quarter was up on the previous three months (showing continued slow recovery), remortgage loans were 21% down. The figures are encouraging, especially for the housing market but we must remember that the numbers are still extremely low, with the house purchase figures for June, less than half the average number of loans in June over the last seven years.

The report blamed low interest rates as the cause of the drop in remortgages, presumably as they think borrowers are staying on their lenders svr rather than shopping around. Loans to first time buyers jumped considerably but remained below the figures for June 08, while they borrowed on average 3.08 times their income, a slight increase on May. The CML also said that “the tightening in criteria since the onset of the credit crunch appears to have ended”. I think many borrowers and all mortgage brokers may have a different view on that one!

The most surprising assumption is the following, taken directly from the release:  Fixed rate deals have increased in take-up throughout the second quarter and by June made up 78% of new lending, the largest share since June 2007. This appears to be supply-driven, reflecting the more widespread availability of fixed-rate products in the marketplace.

It’s more likely that because lenders withdrew their fixed rates and replaced them with more expensive deals in an effort to deter applications, borrowers were keen to get the best deal so rushed to secure the lower rate before it was withdrawn. In fact, another release from a comparison & data company on 19th June reported the number of fixed rates had actually reduced by over 5%.

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