The broker has seen the popularity of fixed rate mortgages steadily drop month on month this year from its peak in March, when 80% of all mortgage applications were fixed rate deals. However, fixed rate deals still made up 74% of all MAB applications in July.
The report attributed the fall in fixed rate applications to a decreased likelihood of an imminent interest rate rise.
The number of mortgage applications also fell in July, down 8% on June numbers, according to the Index, albeit 23% higher than the corresponding month in 2010. Also mortgage applications for the year to date are 17% higher than for the corresponding period in 2010.
The average loan size on mortgage applications in July was £135,873 compared to £138,965 in June, a decrease of 2.2%.
The average loan to value on mortgage applications in July was 69.1% compared to 71.3% in June. Mortgage applicants had an average of £60,759 deposit to put towards their mortgage, a significant increase on the average deposit in June of £55,937.
The average age of a mortgage applicant in the UK in July was 37 years 4 months and the average salary of a mortgage applicant was £34,675.
Remortgages
Remortgage applications fell by 18% in July, although the total number of applications in the year to date were 34% higher than the corresponding period in 2010.
The percentage of homeowners remortgaging on to fixed rates dropped in July to 60% down from 64% in June. The average loan size of remortgage applications in July was £142,005 compared to £150,740 in June, a fall of 5.8%.
The average LTV on remortgages rose slightly in July to 55.8% compared to 55.3% in June.
Interest rates
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Surprisingly fixed rate mortgage applications fell in July at the same time as average two-year and five-year fixed rates dropped to all time low levels.
“This shift towards variable rate products is likely to be a response to expectation levels of an imminent interest rate rise easing.
“With a raft of economic indicators showing further slowing of the UK economy and a recent poll of leading UK economists forecasting no bank base rate increase in 2011 and several predicting no change until 2012 variable rate mortgage take up has strengthened.
“Also the view that low rates are here to stay for some time yet, will have been boosted by the US Federal Reserve announcing that, due to sluggish growth, it envisages holding its official federal funds interest rate for the next two years.
“However, even though the Bank of England could well keep the base rate at 0.5% until early 2012, what we’re unlikely to see is a seismic shift towards borrowers choosing variable rate products.
“With so much uncertainty in the UK economy, mortgage applicants are still keen to take any risk out of the equation, and are happy to pay the premiums on fixed rates for that security element. There will always be a nucleus of borrowers who want the comfort that fixing provides.
“Not surprisingly mortgage transaction volumes eased in July after hitting a high point in June, as families headed off on their summer holidays. In a normally functioning mortgage market, application numbers drop off during July and August, so the market performed as expected.
“A stronger indicator as to the health of the mortgage market will be applications in September and October, as historically we would expect to see numbers start to pick up.
“In terms of product availability, competition amongst lenders continues to pick up, however deals throughout July remained at similar levels to the previous month.
“Products numbers were around 8,700, although products typically available to intermediaries eased a little to 7,250, while those available directly via lenders increased towards 1,500.”
