This is according to the latest figures from the Mortgage Advice Bureau/Coreco National Mortgage Index.
Following the expected summer lull in mortgage activity in August, purchase mortgage applications jumped 14% in September. Remortgage applications also jumped by 14.3% in September compared to the previous month.
Although housing market activity traditionally picks up in September, purchase mortgage applications are still up almost a third (31.2%) on September 2009.
While many buyers remain nervous about unemployment and the ramifications of the Spending Review, the surge in the number of mortgage applications is being fuelled by continued low interest rates and increased competition among lenders resulting in some attractive deals, particularly on fixed rate mortgages.
The average LTV on purchase mortgage applications rose slightly from 70.2% in August to 70.4% in September, while the average loan size for purchase mortgage applications dropped 1.3% from £129,270 in August to £127,591 in September.
The average LTV on remortgage applications dropped to 53.1% in September from 56.9% in August, while the average remortgage application loan size actually increased 10.8% in the same period, from £134,416 to £148,934.
Regionally, the South West and East Anglia saw a 56.3% and 50% rise in purchase mortgage applications respectively in September compared to August. Meanwhile, Yorkshire & Humber (North, West and South Yorkshire, plus Humberside) witnessed an 18.9% drop-off in purchase mortgage applications in September compared to the previous month.
The average LTV on purchase mortgage applications in September was highest in the North of England (which includes Northumberland, Cumbria, Tyne & Wear and Cleveland) at 73.5%, and lowest in the South West (64.4%).
Wales witnessed the largest fall in average LTV on purchase mortgages applications compared to the previous month, falling from 81.2% in August to 70.9% in September, while East Anglia saw the average LTV on purchase mortgages applications increase from 68.3% in August to 76.3% in September.
Looking at the types of mortgage products (fixed or variable) arranged in September, the majority of purchase and remortgage applicants (62%) chose fixed rates over variable, compared to 58.5% of applicants choosing fixed rates in August.
Brian Murphy, head of lending, independent mortgage broker Mortgage Advice Bureau: “The uplift witnessed in September following the drop-off in August reflects a more normal level of seasonal activity.
“We have seen an increase in mortgage activity in seven of the ten regions in the house purchase arena and in eight out of the ten regions in the remortgage sector in September versus August.
“However, with the new coalition government announcing specific plans to make changes to the provision of child benefit ahead of the widely anticipated Spending Review, albeit for higher rate taxpayers, we are seeing real evidence that disposable incomes are going to come under considerable pressure and this is likely to put a further brake on borrowers’ ability and appetite to move home.
“Although interest rate rises look unlikely in the short term, we have seen borrowers seeking the sanctuary that fixed rates afford them in increasing numbers. The number of house purchase borrowers who opted for fixed rates rose in all ten regions during September and reached its highest proportion so far this year, at 65.1%.
“Overall, the proportion of remortgage borrowers opting for fixed rates also increased from 53.6% during August to 55.8% in September, although variable rates remained in the ascendency in three of the ten regions.”
