The Council of Mortgage Lenders (CML) reported that loans for house purchase reached 55,000 in October, the highest level since December 2007, and a near 100% rise from the trough of January 2009.
They also released some interesting figures on the popularity of fixed rates. From a high of 80% of new loans in July, fixed rates were only chosen by 66% of new borrowers in October, a number which I suspect has fallen further since. Tracker deals seem to be taking up the slack, as their generally lower rates accounted for 21% of new loans in October, as more borrowers buy into the forecasts of sustainable low interest rates.
The CML didn’t say what accounted for the remaining 13% of new mortgages, but given the lack of capped deals, and lenders reluctance to allow borrowers to choose a standard variable rate (svr) when moving home, I expect the balance will be largely made up of discounted deals.
While the pricing of some of these deals will look attractive, borrowers could be caught out if the lender decides to unilaterally increase their svr, thereby increasing the cost on a discounted mortgage. Don’t think this won’t happen in this environment of low rates, as this year we have seen a number of lenders increase their svr, including the Ipswich and Cambridge building societies, and more recently Accord, part of the Yorkshire Building Society.