High uptake of fixed rates in February

January was a month of dramatically subdued mortgage activity, dominated by remortgages at a low loan-to-value (LTV) and low income multiples. Any purchases, including first time buyers (FTB’s) were those with ample deposits and good affordability.

Katie Tucker, Technical Manager for Charcol comments: “January was made up almost entirely of the ‘bread and butter’ mortgages: the ones for which demand rarely falls. However, according to the Charcol Mortgage Monitor, in February; all mortgagor types are more active.”

Fixed vs. variable?

A whopping 52% of all borrowers took fixed rates in February. Katie Tucker continues: “This is surprisingly high compared to the more recent norm of around 33%; so borrowers’ choice in February was more to do with rate than outlook for Bank rate movement. The jump could partly be attributed to the borrowers’ rush to take advantage of the new ‘ultra-low’ fixes with high fees, protect themselves, such as the 4.75% from First Direct, or the 4.99% from Abbey. However, January is always an unusual month for activity, this one being especially tumultuous, so an increased fixed rate take-up in February may be the result of January’s cautious buyers returning late, having given the market time to settle. Next month’s figures will provide a clearer picture.”

Buy-to-let

Miss Tucker continues: “Remortgages for Buy-to-lets were up in February compared to January, but new purchases for Buy-to-lets remained low. Britain will be reluctant to fall out of love with amateur landlordship however: buying-to-let should be boosted this year, as first-time-buyers who were stalled at the starting line, continue renting, thus improving rental yields.”

First time buyers

“First time buyers bounced back, and made up 10% of mortgage applicants this month, as they took advantage of the last of the high loan-to-value deals. This more than doubled the 4.5% of buyers that were first-timers in January.”

Loan to value ratios

Tucker continues: “First-time-buyers continue to have to take large mortgages, and the average first time buyer borrowed 80% of their property value, compared to other purchasers whose loan to value was 74%. However, high loan amounts will be held down now, as first-timers with little or no deposit are nudged out of the market all together; mortgages above 90% are nigh on extinct. Fewer than 1% of borrowers took mortgages above 100% in February, and they will be the last.