The Mortgage Purchase Index’ series analyses trends from thousands of mortgage applications made in the last quarter through Legal & General’s Mortgage Club.
Q1 2009 key findings were as followed:
• 72% of residential borrowers chose a fixed rate compared to 65% in Q4 2008
• 68% of buy-to-let borrowers chose a fixed rate compared to 43% in Q4 2008 and 30% chose a variable rate, compared to 56% in Q408
• Average two year fixed rate was 4.78% (vs. 5.90% in Q3); average three year fixed rate was 5.41% (down from 6.30%)
• Average residential LTV was 58%, whereas for buy-to-let it was 68%
Commenting, Stephen Smith, director of housing at Legal & General, said: “Since we started producing these reports in early 2008, the popularity of fixed rates has swung wildly. Fixed rate pricing has only really stared to come down in the past few months, and even then only for those borrowers with a hefty deposit. The gap between what you’d pay with a 40% deposit compared to what you’d pay with a 5% deposit is still significant. However, fixed rates are very much back in favour, partly because lenders have been increasing the margins on their new tracker mortgages.
“Many advisers are encouraging their clients to overpay wherever possible to try and enhance and maintain the equity they have in their property. Consequently, average LTVs have been consistently dropping – from 66% in Q108 to 58% in Q109. The challenge though is trying to convince a borrower on a low SVR to remortgage to a higher fixed rate to insure against the inevitable rate increases which the Bank of England will instigate at some point to combat the threat of inflation. This all understandably seems a very long way off for the average homeowner, but is worth thinking about.”
