Legal & General’s third report in the 'Mortgage Purchase Index’ series analyses trends from over 19,000 mortgage applications made in the last quarter.
Q3 Core Findings:
* Throughout the past three months almost 35% of residential borrowers preferred to take up variable rate mortgages. This trend shows a rise of about 24% from the last quarter.
* On the other end 63% sought fixed rates, comprising mostly residential borrowers. However, their percentage was down from 75% compared to last quarter.
* Almost 55% took variable rates mortgages in comparison to 43% fixed rates. Among the takers mostly were buy-to-let borrowers.
* Through the past quarter, the standard residential mortgage showed at a scale of 60% loan to value.
*A recent trend shows that three, five and ten year mortgages have become more costly, whereas two year fixed rates have turned inexpensive.
Stephen Smith, Director of Housing at Legal & General said: "As suspected, the popularity of fixed rate mortgages peaked last quarter when we found that three-quarters of borrowers were taking this type of mortgage, compared to 63% in Q3. Trackers will have attracted greater attention as forecasts of base rate cuts become more prominent. The popularity of variable rates has also perhaps been boosted by the number of borrowers sticking with their lender’s standard variable rate when they came to the end of a deal rather than remortgaging straight away. This approach of sitting on the fence is a sign of the times and would have been unheard of a year or so ago. Fixed rates over the past three months have been 'expensive’ compared to the beginning of the year, although two-year deals have dropped somewhat recently.
"The average residential borrower has been able to put up a 40% deposit, which indicates that whilst there are many people with healthy levels of debt, there are now far fewer mortgages being offered with high LTVs. This has lead to the average LTV for residential borrowers falling throughout the year. On the other hand, the average LTV for buy-to-let borrowers has risen from 67% to 73%, showing that cash-rich landlords are taking advantage of the increasing demand for rental accommodation."
Notes to Editors:
Data based on 19,140 mortgage applications through the Legal & General Mortgage Club from June to August 2008.
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