There are more applications this year than the whole of 2012 and record two year and three year fixes are helping to attract 93% of buyers, according to the National Mortgage Index from the Mortgage Advice Bureau.
Using data from more than 500 brokers and 800 estate agents along with average mortgage rates supplied by the moneyfacts website, the index shows three year rates falling 0.14% between August and September to dip below 4% for the first time since before 2007.
With two year rates also shedding 0.13% to reach a record low of 3.56%, an unprecedented number of home buyers opted for fixed rate deals in September. This was up from 86% 12 months ago and is the most seen by the index since it began tracking this data in January 2009.
Fixed rates also soared in popularity among people remortgaging their homes, with 91% of applicants choosing fixed rates compared with 79% in August.
Two year rates have now fallen by 1.01% in the last year, while three year rates have improved by 0.97% and five year rates by 0.73%, despite the latter rising 0.04% between August and September to 3.87%.
The improves equate to a £90 saving on monthly capital and interest repayments for the average two year fixed deal, an £89 saving on a three year deal and a £66 saving on a five year deal.
Activity levels bounced back by 5% in September having dropped by 10% during the traditional lull between July and August. This made September the second busiest month of 2013 to date with 58% more applications than the same time last year.
As a result, more people have now applied for a mortgage in the last nine months than in the whole of 2012. Buyer activity has grown by 61% since September 2012 while remortgaging activity is up by 52%.
The index report also shows that the emphasis on distribution shifted further towards brokers in September: intermediary product numbers increased by 2.6% to 7,979 while direct-only product numbers fell by 15% to 2,766, the lowest number in four months.
Almost three quarters, 74%, of mortgage products were available through brokers compared with two thirds, 66%, in June 2012. This builds on the trend seen in Council of Mortgage Lender data for the second quarter of 2013 when brokers enjoyed their largest share of first time buyer loans in over a year at 58% compared with 59% in the first quarter of 2012.
‘Variable rates briefly returned to favour when the Bank of England introduced its forward guidance, but lenders haven’t yet called time on the season of discounted fixed rate products. Thanks partly to government funding and support, affordable mortgages have now been in vogue for much of the year and the competition to win over the house buying public should mean that conditions continue to improve in borrowers’ favour,’ said Brian Murphy, head of lending at the Mortgage Advice Bureau.
‘It means that Help to Buy phase two is coming on stream at a time when confidence and momentum have already resurfaced in the market. This is one reason why lenders are treading carefully with their opening offers under the mortgage guarantee, which are sure to improve as the scheme finds its feet during the remainder of this year and into 2014,’ he explained.
‘Help to Buy will be a godsend both for aspiring first time buyers and first time sellers who have been held back by a lack of savings or equity as well as mortgage finance. The good news is that home buyers and movers won’t be left with a choice between Help to Buy or nothing as there are plenty of attractive offers with and without government support,’ he added.
