Combined purchase and remortgage cases were up by a quarter during the first three months of 2013, compared with the final three months of 2012, and by 18% compared with the equivalent period last year.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index shows the strongest momentum is with purchase activity, helped by an 11% monthly increase to March 2013. This boosted the quarterly increase in purchase business to 26%, compared with 22% for remortgages, which dropped by 2% in the month.
Total mortgage activity for March was 22% higher than in March 2012, fuelled by a 13% annual increase in purchase mortgage cases and 19% more remortgage cases.
Competition for business between lenders meant there were more mortgage products available on average during March – 9,269 – than any month since November 2011. Apart from December 2012, when the average total fell by 1%, consumer choice has improved every month since the Funding for Lending Scheme (FLS) was launched in August 2012.
There were 20% more products available on average during March, compared with July 2012 before the FLS launched and 22% more than in March 2012.
Recent growth has been driven by intermediary products, which increased by 4% in the month and by 22% under the FLS to 6,644 – the widest range on offer since December 2011.
While direct-only products have grown by 15% under the FLS, their number fell by 4% in March to 2,625.
March also saw the average two year fixed rate drop below 4% to 3.9%. This figure – the lowest since MAB’s records began in June 2007 – is 0.78% lower than in July 2012 before the FLS came into effect.
Typical homebuyers are nearly £3,400 better off than last year:
The average homebuyer in the first quarter of 2013 earned noticeably more than the same time last year, with an average income of £38,660 – £3,372 more than in the first quarter of 2012.
Better product pricing meant they were also far likelier to opt for fixed rate deals. While three quarters of buyers (75%) chose to fix at the start of 2012 – when average fixed rates ranged from 4.76% to 4.27% – this increased to 92% during the first quarter of 2013, tempted by fixed rates averaging between 4.47% and 3.90%.
Conditions have improved marginally in 2013 for homebuyers with limited deposits. Average purchase deposits were almost £2,500 lower in the first quarter of 2013 (£61,671) than the final quarter of 2012 (£64,153).
However, despite increasing by 1% in the first quarter of 2013 to 71%, the average loan to value (LTV) for purchase mortgages remained almost half a percentage point lower than in the first quarter of 2012 – signalling the need for initiatives such as Help To Buy to encourage higher LTV lending.
In another sign of continuing caution from lenders, homebuyers’ average income at the start of 2013 continued to make up more of the average loan (25.7%) than in the first quarter of 2012 (24.4%).
The biggest shift in LTVs at the start of 2013 benefited remortgage customers as activity continued to improve following a slump in 2012.
Whereas the typical consumer borrowed 55.5% of their existing property’s value at the end of 2012 – putting £119,134 forward as equity – the typical remortgage increased to 59.8% of the property value in the first quarter of 2013, with the typical equity down by over £5,000 to £113,864.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “There has certainly been no shortage of options when it comes to selecting mortgage products so far this year. Lenders have served up a feast of offers that have fed consumer demand with some exceptionally low fixed borrowing rates.
“What we need are greater helpings of funding for people on the fringes of the market, who are either knocked back because of strict criteria or scared off by towering deposits. We are almost halfway through the FLS, but despite the incentive to increase lending, the average borrower is still putting up almost 30% of their property’s value as a deposit.
“Not everyone has this kind of money available, so Help To Buy is definitely needed to open the market up to more would-be homeowners. Interest in house purchases is already far healthier than it was last year, and we are confident there is plenty more to come.”
