Legal & General launches Mortgage Purchase Index

Legal & General has launched a quarterly index analysing the type of mortgages, average LTV and average rates for mortgage applications through its Mortgage Club. The data is based on over 28,000 applications over the past three months.

The report shows that:

57% of residential mortgage were on fixed rates compared to just 35% for buy-to-let
Average loan-to-value for residential mortgages is 66% vs. 76% for buy-to-let
Average two-year fixed rates were 5.87% compared to 5.82% for five-year deals

Stephen Smith, Director of Housing at Legal & General said: “More than half of the 28,000 mortgages through our mortgage club in the past quarter were fixed rates, but there is a distinct difference in attitude to risk between residential and buy-to-let borrowers. Owner-occupiers continue to require the peace of mind that a fixed rate mortgage provides, whereas landlords feel more comfortable on variable rates. Many lenders had upped the margins on their tracker rates last year as a result of the well-publicised credit problems, making them less appealing to the borrower. They have clearly seen this as an opportunity to rebuild margins following erosion of mortgage profitability dues to a competitive market.

“If more residential borrowers had selected trackers rather than fixed rates over the past quarter then they would have benefited from the two recent base rate cuts. We would ordinarily expect to see the proportion of tracker rates rise considerably over the next quarter, however lenders have been reducing the discounts applied to trackers and in effect raising rates. Fixed rates are therefore likely to remain popular.”