The Council of Mortgage Lender’s (CML) regulated mortgage survey (RMS) into the state of the market has revealed mixed results.
With evidence of a buoyant market, the trade body has revealed a move by an increasing number of lenders, and therefore borrowers, to affordability based calculations, allowing borrowers to get mortgages based not only on income, but levels of affordability..
Its monthly research also indicated the continued popularity of fixed rate products. Despite a number of industry commentators arguing fixed rate products are no longer the best option, as a result of swap rate movement and uncertainty over the Bank of England Base Rate, the CML research has confounded this, revealing fixed rate mortgages accounted for 71 per cent of all loans for house purchase and remortgage purposes. The CML attributed this figure to consumers taking advantage of competitive low-rate deals available over a longer-term.
Type of buyer
The research also showed first-time buyers (FTBs) were increasingly looking to stretch themselves financially to get onto the property ladder. The average FTB loan increased from £103,839, in March, to £106,400, with FTBs borrowing 3.21 times their income to get a mortgage. However, despite rises in borrowing trends, the data showed mortgage payments as a proportion of income fell from 17 per cent in 2005, to 16.2 per cent in April 2006.
The CML called for greater help for FTBs, but admitted rising levels of student debt, and the increasing desire by young professionals to be able to move quickly and easily was hindering the FTB market, with many choosing to rent, rather than buy a property.
Remortgaging figures also dropped 5 per cent from the previous year and accounted for 36 per cent of all mortgage loans for April. House purchase loans reported the highest figures, accounting for 46 per cent of all loans in April, a rise of 3 per cent from March. However this represented a drop from April 2005’s figures of 45 per cent.
CML director-general Michael Coogan, said: “The strong take up of fixed rate deals is encouraging because they give consumers confidence in their mortgage payments and allow them to plan ahead financially.
“It’s also interesting to see that while FTBs are borrowing a greater multiple of their income to get a mortgage, their payments as a proportion of income are lower than in the same period last year. This could be due to the higher take-up of fixed rates over the past year.”
