• Average rates predicted to drop below 4% by April
• Price war pushes remortgage LTVs to a 15-month high
• Average deposit more than £6,000 larger than in Jan 2012
Average rates for two and five year fixed mortgages are predicted to dip below 4% by the end of April, as the National Mortgage Index from the Mortgage Advice Bureau (MAB) – the UK’s leading independent mortgage broker – showed unprecedented interest in fixed rates from borrowers.
More than nine in ten purchase (93%) and remortgage (92%) applications in January 2013 saw borrowers opting for fixed rates. Using data from more than 500 brokers and 800 estate agents, the Index also saw the average loan to value (LTV) for remortgages climb back to its highest point (59.2%) since October 2011, as borrowers higher up the LTV curve benefitted from the lender pricing war.
Deposits stretch homebuyers’ purse strings:
Despite the influx of lower priced deals, house buyers typically had dig deep to find more than £6,000 extra for their deposits than in January 2012. Buyers in January 2013 also took on an extra £12,000 in mortgage debt, compared with the same time last year (see below).
Digging deeper, borrowing more: house purchases in Jan 2013
Average purchase deposit Average purchase loan
January 2013 UK £62,461 £150,494
London £143,574 £314,180
January 2012 UK £56,167 £138,345
London £127,845 £275,915
Difference UK +£6,294 (+11%) +£12,149 (+9%)
London +£15,729 (+12%) +£38,265 (+14%)
The overall growth of purchase deposits has been driven by a hefty rise for homebuyers in London, who put down an average of £23,179 extra as a deposit in January 2013 than they did last year. This increase alone represents more than a third of the typical buyer’s salary (£68,205 – Jan 2013).
Even discounting London, the average purchase deposit across England has increased by £2,267 in the last twelve months, with only two regions – the West Midlands and East Anglia – seeing average deposits fall.
Falling rates boost activity levels:
Descending mortgage rates saw two-year fixed deals reach 4.26% in January 2013 – their lowest level since December 2011 (4.24%). At 4.47% and 4.27% respectively, average three and five year deals have not once offered better rates since MAB began tracking this data in summer 2007.
New year launches meant the average number of available products increased slightly in January, up by 1% to 8,716, driven by a 3% rise in direct-only products to 2,427. Overall applications activity for the month within the MAB network was up by 17% on January 2012, with purchase cases up by 18% and remortgage cases by 14%.
Brian Murphy, head of lending at Mortgage Advice Bureau, comments:
“Generous helpings of Government funding mean lenders are showing more appetite for risk, which is a godsend to anyone wondering where they will find the money for a deposit. The best deals are available at low LTVs, but as that space becomes increasingly crowded, lenders are open to offering better rates in return for less up-front investment.
“There has been little to get excited about around remortgages until recently, and just 12 months ago you would struggle to find a deal lower than 5%. Now they are closer to 4% and people looking to remortgage will be pretty pleased with the options open to them.
“We’re looking at an abnormal rate environment compared to the past, with a tiny difference between average two and five year deals. By the end of April, we fully expect the average to dip below 4%, and there has never been a better outlook for mortgages borrowers who tick all the boxes.”