(image courtesy of resalepropertyspain.net)
Figures released by the Council of Mortgage Lenders (CML) show that lending picked up in the month of October after the summer lull. A total of £13.5bn was advanced during the month, compared with £12.9bn in September. However, this figure is 27% less than for October 2008. The group said that the 5% increase was in line with normal seasonal trends seen in the last decade and that the market traditionally picks up in September and October after a drop in the holiday month of August.
Commenting on the figures, CML economist, Paul Samter said: “House purchase activity has picked up significantly. In contrast, remortgaging has dropped to decade-low levels as many borrowers have little incentive to refinance when they move onto low reversion rates, and others find themselves unable to do so due to equity constraints. The coming months are likely to be dominated by seasonal factors rather than underlying change.” CML also said that it expected to see borrowing start to slow down in the run up to Christmas – a normal seasonal trend.
Total mortgage lending for next year is predicted to remain low at £150bn, which is less than half of 2007’s figure of £363bn. Total mortgage lending for 2009 is expected to come in at £141bn. The Bank of England concurred with the CML trend, saying that the number of mortgages approved for house purchase rose from 56,000 in September, to 61,000 in October. The Bank said that mortgage availability had increased because of falls in lender fund costs, house price rises and low interest rates.
Fixed Rate Mortgages Now Below 5%
According to research from the financial information service Moneyfacts, the average cost of a two-year fixed mortgage is now typically 4.99%. Fixed rates have been above 5% since June, when banks reacted to rising swap-rates by putting the interest rate up to 5.21%. Of course they were less quick to pass on the subsequent falls in swap-rates but increasing competition has forced many hands.
Spokeswoman for Moneyfacts, Michelle Slade said: “Borrowers are finally starting to see more positive news coming out of the mortgage market. Falling rates on popular two-year fixed-rate mortgages, occurring against a backdrop of lenders raising the maximum loan to value ratios on their most competitive deals suggests that competition is increasing. Lenders have become accustomed to the post banking collapse world and appear to finally be relaxing their credit criteria while remaining within a regulated frame work.”
Whilst there is positive news for a two-year fixed deal, fixed deals for longer periods have actually gone up in price. The average cost of a three-year fixed mortgage currently stands at 5.58%. For a five-year deal you will currently pay around 6.15%, which has gone up from an average of 5.57% in June. This is despite the fact that five-year swap-rates fell from 3.38% to 3.17% in the same period of time. As is so often the case, the banks giveth with one hand and taketh away with the other.