Borrowers Switch Back To Fixes

Take up of fixed-rate products increased further as the interest rate cycle has now reached its floor, according to new data from the Council of Mortgage Lenders (CML).

In April, 69% of borrowers took out fixed rate mortgages with an average rate of 4.83%, the highest share since June 2008.

There was a modest improvement in the number of loans for house purchase. However, activity is still very low by historical standards with 35,600 house purchase loans in April, compared to an average of 88,000 loans in April over the last seven years.

The number of loans for remortgage continued to decline as low reversion rates and stricter credit criteria for the best deals make refinancing less attractive. There were 31,000 remortgage loans in April, 22% down on March and 65% down on April last year. Gross mortgage lending in April was £10.5 billion, down from £11.5 billion in March.

There were 22,100 loans to home movers worth £3.1 billion, compared with 30,600 loans worth £5 billion in April last year. Lending criteria continued to edge down with a typical home mover putting down a 33% deposit and borrowing 2.63 times their income, compared with 30% and 2.69 in March.

CML Head of Research, Bob Pannell said: "With the interest rate cycle now at its floor, an increasing proportion of borrowers are taking out fixed rates, including for longer term periods of 5-10 years. With expectations for rates to remain low in the near future, shorter term fixed-rate deals are less appealing than attractively priced variable rate deals.

"There are tentative signs of house purchase lending stabilising, but we need to see considerably higher transaction levels to underpin house prices."

(CD/JM)