The surge in activity was fuelled by 60% more buyers and driven by fixed rates falling for a ninth consecutive month, prompting 80% more consumers to choose fixed deals compared to April last year.
Fixed rate deals have now been the product of choice for more than nine in 10 borrowers every month during 2013, having reached this level of popularity just once in the previous 36 months.
An influx of purchase customers helped to boost activity levels in the market during April. While the total volume of applications was up by 10% from March and by 54% year on year, performance was even stronger in the purchase arena.
Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index shows 13% more activity from purchase borrowers compared with March and 60% more than in April 2012. In comparison, monthly remortgage business registered a marginal 1% increase, bringing the overall year on year growth to 38%.
Despite figures from the Council for Mortgage Lenders (CML) indicating more first time buyers accessed 90% plus loan to value (LTV) mortgages in the first quarter of 2013 than the four previous years, there has been little overall change in the typical purchase deal sought over the last year, the data also shows.
The average purchase LTV in April 2013 was less than 1% higher than April 2012, with the typical borrower putting down a comparable deposit and taking out a similar sized mortgage. Although the average homebuyer in April 2013 was slightly younger than the same time last year, they enjoyed an annual income that was 8% higher on average.
The figures show that after three years of improving LTV ratios for home buyers, the trend has reversed with lenders advancing less funding relative to homebuyers’ income in April 2013 than 12 months before.
Despite falling rates and government initiatives such as the Funding for Lending Scheme and the fledgling Help To Buy scheme, this suggests greater demands on home buyers with regard to their level of income and highlights the challenge facing the industry in widening access to the property ladder, said the MAB.
The arrival of the Help To Buy equity loan scheme alongside New Buy has coincided with a rise in the share of mortgage products available through brokers. Having accounted for 70% of all products in February 2013, the same as in August 2012 when the FLS launched, some 74% among a total of 9,139 products are now available through the intermediary channel.
The bureau also said that potential home buyers will be encouraged by the continuing drop in fixed rates. Average two year rates fell by 0.77% to 3.83% in the 12 to April 2013, three year rates dropped by 0.67% to 4.17% and five year rates fell by 0.82% to 4.00%, the first time they have reached this level since MAB began tracking this data in June 2007.
‘The government has made a bold statement about its desire to create wider access to mortgage loans and shift activity up a gear. By pushing property back into the spotlight, it has helped draw attention to some of the deals that are already out there which, in the case of five year fixed products, are the best that we have seen since the recession,’ said Brian Murphy, head of lending at the MAB.
‘What comes next in the development of Help To Buy will determine just how many people can join the rush to secure a good deal on property, whether or not they are first time buyers or second steppers. We are still waiting to see how the mortgage guarantee will work in practice, but in the meantime the competition between lenders means there is plenty of reason to shop around and seek advice to secure a favourable offer,’ he added.
Meanwile, the latest report from the Council of Mortgage Lenders estimates that total gross mortgage lending increased by 4% on March to £12.1 billion in April, but cautions that meaningful comparisons with last April are difficult.
'Our forward estimate is that gross lending in April was £12.1 billion. This would have been 4% up on March. The comparison with April last year which was 21% higher, is flattered by the temporary dearth of house buying activity immediately following the closure of the stamp duty concession,' explained. CML chief economist Bob Pannell.
'The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008, but not as strong as the year earlier comparison suggests. Gross lending on a seasonally adjusted basis has been running comfortably above £12 billion for several months, but this is still barely half the average level of lending seen in 2003/2004,' he added.
Richard Sexton, director of e.surv chartered surveyors, said that there are signs of a refreshed and more flexible mortgage market emerging in 2013. 'Last month marked the strongest April for gross mortgage lending since 2008. But the biggest marker of success is the range of borrowers that the new mortgage market is now able to reach. One in nine mortgages in April was to high LTV borrowers, 14% higher than last year,' he pointed out.
'Inflation is falling, confidence in the economy is improving, and the FTSE is at a record high. It’s a veritable cocktail of good economic news, and the strongest indication yet that the mortgage market has freed itself from the grip of the financial crisis,' he explained.
'Banks have widened the goalposts for borrowers. They’ve introduced record-low rates, and a wider range of mortgages. Lenders have grown in confidence, so they are more willing to lend to high LTV borrowers. This has sparked a burst of activity, especially among first time buyers. And falling inflation will make it easier for prospective buyers to construct a deposit for a mortgage. This should help keep the mortgage market firmly on the road to recovery,' he added.
However, Duncan Kreeger, director of peer to peer lender West One Loans, pointed out that gross mortgage lending in the last 12 months still only represents 40% of the 2007 level. 'But even this meagre flat lining has only been possible thanks to huge subsidy. Strong comparisons with a year ago only reflect just how dependent the High Street lenders are on government support,' he said.
'In particular, business lending is still thoroughly submerged in the crisis, having seen negative growth since 2011. That’s part of the reason why, at £1 million pounds a day, alternative business finance has already outpaced Business Secretary Vince Cable’s latest £300 million pound business bank offering by 20% this year. Traditional finance is undergoing a process of disintermediation, a process that could be terminal for certain old ways of doing things, but a trend that could also provide a much more solid foundation for the future of finance,' he added.
But David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains, said that April’s mortgage figures are the strongest for five years, and a sign the mortgage market is gradually being reknit after being torn apart during the financial crisis.
'The UK’s housing market is showing signs of growing stronger, boosted by greater consumer confidence in the market and wider economic recovery in Britain. Mortgage lending has been helped by the Funding for Lending scheme, which is opening the door to more first-time buyers who were shut out of the market by tight criteria and high deposit requirements,' he explained.
But he acknowledges that the path to a full recovery will be long and winding. 'Gross lending is still less than half what it was in April 2008. But demand is improving, cheaper mortgages are available, and lenders are competing for business which is driving down rates and making mortgages more affordable,' he added.
Brian Murphy, head of lending at the Mortgage Advice Bureau, said that the industry shouldn’t be put off by the end of the stamp duty holiday affecting year on year comparisons. 'A 4% boost to mortgage lending since March this year makes April one of the strongest months in the last four years, and we also saw a 10% monthly spike in mortgage applications during April including 13% more interest from home buyers,' he pointed out.
'The government's interest in the housing market has put property back in the spotlight and drawn attention to the attractive deals that are out there. Average five year fixed rates reached 4% in April, which is the lowest they have been since the recession. The publicity around Help To Buy has already prompted a surge of interest in new build property, and people looking to sell their homes are also unlikely to find a shortage of willing buyers provided they are sensibly priced,' he said.
'While it is true the housing market is making steady rather than rapid progress, positive figures for purchase activity and first time buyers are especially encouraging as they show that attention is beginning to focus where it is needed the most,' he added.
