While the average LTV on purchase mortgages increased from 67.5% in June 2010 to 71.1% in July 2010.
The average loan size for purchases also increased, up 6.7% from £130,609 in June 2010 to £139,404 in July 2010, the highest average loan size since 2007, pre-Credit Crunch.
Average LTVs on remortgages rose from 53.8% in June 2010 to 55.6% in July 2010, although average remortgage loan size fell 4% in the same period, from £149,769 to £143,821.
Although lenders might be showing a little more confidence, that is not the case with applicants when deciding whether to go with a variable or fixed rate product.
Back in March 2010, variable products were the preferred choice among both purchase and remortgage applicants, with 53.9% choosing not to fix.
Now, only 38.8% of new mortgage applications are variable deals, as buyers migrate to fixed rates, despite the general industry consensus that interest rates will stay low for some time.
On volumes of mortgages, there was a 1.3% fall in the number of purchase mortgage applications made in July 2010 compared to June 2010. This compares to a 5% rise in application numbers in June 2010 on the month before.
Regionally, the average LTV on purchases arranged in July 2010 was highest in East Anglia (78.7%) and lowest in the South West (64.3%).
The average age of mortgage applicants was highest in the South West (40.1 years) and lowest in East Anglia (35.2 years).
National and regional overview
Brian Murphy, head of lending at Mortgage Advice Bureau, said:“Perhaps the standout finding in July is that borrower appetite for variable rate mortgages is waning and fixed rates are now the overwhelming choice. Nationally, we have seen fixed rate mortgages among house purchase customers increase from around 45% in January this year to more than 60% in July.
“Rising average LTVs, of 71.1% in July, are confirmation of growing competition among lenders and a renewed appetite to lend. On a regional level, there is great variation in average LTVs across the ten regions, with average LTVs rising since the start of the year in three regions and falling in seven regions.
“East Anglia, for example, has seen the average LTV rise from 63.2% in January 2010 to 78.7% in July 2010, while average LTVs in the South West fell from 69.4% in January 2010 to 64.3% in July.
“Interestingly, all 10 regions have recorded an increased average loan size over the year to date, increasing from £110,470 to £126,584, a rise of more than 14%. Regional variances were more marked, with Wales recording the smallest increase in average loan size (6%) and Greater London the largest (29%).
“In terms of mortgage type, the South West has seen the percentage of fixed deals increase from just 35.7% of all mortgages arranged in March 2010 to 59% of all deals in July 2010.
“In terms of the types of borrowers, the average age of house buying customers has fallen marginally year on year from 38 to 37 years old.
"Regionally, average borrower age has fallen in eight out of ten areas. At 36 years, the youngest customers are currently in Yorkshire and Humberside and Greater London. The oldest, at 38 years, are in the West Midlands.”
London mortgage review
The average LTV on purchases in July 2010 was 68%, up from 64.8% in June 2010, although down on July 2009 (71.1%). The average loan size in July 2010 (£281,504) was 2.9% higher than in June 2010 (£273,468), and 21% higher than in June 2009 (£232,637).
Mortgage applications in July 2010 were split 50:50 between fixed and variable rate deals, compared to just 24.5% of mortgage applications in March 2010 being fixed rates.
The average LTV on remortgages arranged in July 2010 was 46.8% compared to 47.2% the previous month, while the average loan size in July 2010 (£329,204) was 18.7% higher than in June 2010 (£277,448).
The London market has rebounded better than most UK regions since the start of the year, and July 2010 saw a 13.4% increase in mortgage applications compared to June 2010, albeit from a very low base.
The average age of a new mortgage applicant in London in July 2010 was 36.2 years, compared to 37.9 in July last year.
London market overview
Andrew Montlake, director, London-based independent mortgage broker Coreco Group, said: “The London market has been buoyed in the past 12 months by an influx of foreign investors looking to take advantage of the dual benefits of lower house prices and a cheap pound.
“However, despite stock levels nationally rising, estate agents in the capital are still bemoaning a lack of good quality stock. It is this that we believe will keep London house prices relatively buoyant in the coming months. We are likely to see a stabilisation and levelling of house prices in London rather than a drop.
“Although mortgage activity has picked up, with more products available and more lenders returning to market, the mortgage landscape is by no means close to returning to normal. In fact, post-Credit Crunch, the market is still getting to grips with just what the new “normal” in terms of mortgage activity actually is.
“Average loan sizes for purchases in London have increased substantially year on year from £232,637 in July 2009 to £281,504 in July 2010, which has reflected a recovery in London house prices driven mainly by a lack of stock.
“As expected, remortgage activity remains low in London and accounted for just 20.8% of mortgages in July 2010. This is due not only to the long period of record low interest rates, but also because, as mortgage lending criteria have toughened, many people, specifically the self-employed or those who purchased using high income multiples, are unable to move from their current lenders.
“The even split between fixed and variable rate mortgages is a reflection of how borrowers, like many economists, are unsure of when the next base rate rise will come. However, we are urging caution and believe that the inevitable base rate rises will come sooner and be more dramatic than most commentators expect.
“There still appears to be a mentality among borrowers of trying to ‘beat the market’ and take low tracker products, when perhaps taking a longer, more cautious approach, and fixing now would be more advisable. Fixing in now for the medium to long-term, and paying slightly more, will prevent sleepless nights in the future.”
