Low interest rates and rising prices are encouraging more people to buy property and move home in the UK, it is claimed.
As the number of approvals for house purchases increased in October to their highest level since December 2007, the latest data from The Council of Mortgage Lenders shows that it is new mortgages that are leading the improvement.
October remortgaging approvals remained static on a month earlier at 33,000 and apart from a total of 30,000 in August, remortgaging is at its lowest level since CML records began.
Also approvals for fixed-rate mortgages continued their downward trend from a high in July, when 80% of all new loans taken out were fixed. In October, volumes decreased by 14%, to 66%, as 21% of borrowers opted for trackers, compared to July’s tracker low of 12%. Borrowers are turning to trackers mainly because they now have greater expectation that interest rates will stay at, or near, their current low for a while to come.
‘It appears that low interest rates for those with substantial deposits, coupled with this year’s sustained increases in house prices, are encouraging more people to buy or move home,’ said Director general Michael Coogan.
‘But the same low interest rates that are driving house purchase activity provide little incentive for borrowers to refinance their loans. This, coupled with ongoing tightness in lending criteria, continues to hold back the remortgage market,’ he added.
Meanwhile research shows there are more mortgage products available for those keen to get on the first rung of the property ladder. The number of mortgage products available to first time buyers has risen to 1,354, up 18.3% on August’s low, according to comparison site Moneysupermarket.com.
‘It is encouraging to see an increase in lenders providing suitable options for first-time buyers. If lenders continue to give a helping hand to first time borrowers we could see a significant improvement in the housing market,’ said the firm’s mortgages channel manager, Hannah-Mercedes Skenfield.
CML figures also show that at the end of September, 194,600 home loans, some 1.77% of all UK residential mortgages, were in arrears of 2.5% or more of the outstanding balance. The result compares with 204,200 mortgages in arrears on the same basis at the end of June, or 1.86% of all mortgages.