Fixed rate mortgages are back in demand
Published 12/08/2010 | 08:00
Nearly half of all new borrowers took out a fixed rate mortgage in June as lenders brought prices down, according to research.
The Council of Mortgage Lenders (CML) found 48% of all new borrowers opted for a fixed rate home loan - the highest proportion seen so far this year.
This marks a reversal of recent trends, with fixed rates proving unpopular earlier this year due to the historic low bank base rate.
But the cost of fixed rate mortgages has been coming down to more attractive levels, with the average interest rate at 4.45% in June, down from 4.53% in May and marking the seventh consecutive monthly fall.
The CML's latest lending statistics also showed a marked increase in overall lending for house purchases in June.
There were 52,000 loans advanced in the month, worth £7.6bn, up 19% in volume and 23% in value month-on-month.
On a year earlier, this came as a 14% hike by volume and 27% by value, which is now the 12th month in a row where lending has been higher year-on-year.
Lending for remortgage also rose, albeit a modest increase from 26,000 loans to 27,000 between May and June.
More first-time buyers were able to secure their first step on the property ladder, with loans to these borrowers up by a fifth since May to 19,400.
The CML said borrowers were being helped by a slight easing in lender credit criteria.
However, it cautioned the increase in lending levels may not last as the Government's austerity measures kick in.
Paul Samter, CML economist, said: "For the time being, the effects of Government spending cuts have yet to make an impact on mortgage demand, and activity continues on its upward trajectory. But we still expect house purchase activity to be muted in the coming months."