Lender competition drives mortgage product numbers to record high
Date online: 18/09/2014
A total of 12,265 products were available in August: the largest number in over five years since the Index began tracking this data in April 2009, surpassing the previous record of 12,106 in December 2013.
The mortgage product range grew by 964 between July and August alone – the biggest monthly increase in over three years, since April 2011. New intermediary products outnumbered new direct-only products by almost 5:1, with 798 extra products available via brokers in August than in July, compared with just 166 more being offered direct from lenders. Intermediary product numbers rose at twice the rate of direct products (10% vs. 5%).
The 8,576 broker products available in August was the largest total for 2014 to date and more than twice the number available direct from lenders (3,689). Having dipped in June, intermediary product numbers have now grown by 1,278 in the last two months while the direct product range has fallen by 104. Brokers had access to 70% of products in August, up from 69% in July and 66% in June.
Remortgaging activity has increased the most over the last year
Despite the summer slowdown, mortgage application volumes were significantly up year-on-year with total applications 14% higher than in August 2014. Data from over 600 brokers and 900 estate agents shows the remortgage market has seen the greatest annual increase in activity, with applications in August 2014 up 19% year-on-year while purchase applications were up 12%.
Remortgaging during August was driven by customers with more valuable homes (+3%) and greater sums of equity to put forward (+7%) than in July. Recovering house prices meant that the typical value of a home being remortgaged in August was up 24% year-on-year (to £319,320 from £257,342), allowing applicants to put up 43% more equity (£151,489, up from £105,845).
In contrast, purchase activity was fuelled by customers buying cheaper homes (-2%) and seeking less mortgage finance (-2%) than in July, although both figures were up year-on-year (by 6% and 7% compared with August 2013).
Appeal of fixed rates defies rising prices
Speculation on the timing of an interest rate rise saw a slight drop in borrowers’ preference for fixed rates in August, with 94% of homebuyers fixing (down from 95% in July) and 87% of homeowners remortgaging (down from 89% in July).
Despite this, fixed rates remained noticeably more attractive than a year ago – particularly among borrowers seeking to improve their existing deal. August 2013 saw just 79% of remortgagers and 91% of homebuyers opting to fix.
Using data from Moneyfacts.co.uk, the Index shows that the appeal of fixed rates comes despite the fact that the average two and five year product was more expensive in August 2014 than it was twelve months earlier. Average two year fixed rate pricing was 2 basis points (bps) higher while average five year pricing was 38bps higher. In contrast, the average three year fixed rates has fallen by 27bps in the last twelve months while the average two year tracker rate was 48bps lower in August 2014 than in August 2013.
Brian Murphy, head of lending at Mortgage Advice Bureau, comments:
“The Mortgage Market Review (MMR) has put advice at the heart of getting a mortgage and underlined the value of speaking to a broker to access the best choice of deals.
The mortgage industry may have paused for breath following MMR, but looking at both supply and demand during August, there are strong signs of enthusiasm from both lenders and consumers. Despite the holiday season, we have still seen double-digit growth in mortgage applications year-on-year while lenders are tripping over themselves to outdo one another with their latest deals.
It is an encouraging sign that healthy competition can continue under the new regime, and shows that consumer choice remains intact: just with carefully monitored parameters in place to govern who can borrow and how much. It means the market recovery can continue on a steady footing and absorb the impact of the eventual base rate rise.”