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The stand-out trend in July’s National Mortgage Index, a new index jointly collated by the Mortgage Advice Bureau and Coreco Group, a broker focused on the London market, is that borrowers are increasingly opting for fixed rate mortgages.

Back in March 2010, variable products were the preferred choice among both purchase and remortgage applicants, with 53.9% choosing not to fix. Now, only 38.8% of new mortgage applications are variable deals, as buyers migrate to fixed rates.

Some borrowers are fixing because there is an excellent selection of highly competitive fixed rate products available at present – for those with a certain amount of equity and a good credit history, at least.

However, others are fixing because they are increasingly twitchy about the possibility of rate rises sooner rather than later and want to minimise their exposure to a sudden hike in Bank Rate.

Above target inflation is the one factor that could force the Bank’s hand sooner than many people think – especially given the impending rise in VAT to 20%.

Reflecting a gradual rise in lender confidence, the average loan-to-value (LTV) on purchase mortgages has risen above 70% for the first time since February, from 67.5% in June to 71.1% in July.
 
Meanwhile, the average purchase loan size in July, at £139,404, was the highest since 2007, pre-credit crunch.
 
In terms of the types of borrowers, the average age of house-buying customers has fallen marginally over the past year from 38 to 37.
 
This may seem an insignificant statistic but it is quite important in terms of the wider health of the property market. The lower the average age of property buyers, the better the market is doing.

In summary, all three of these trends – higher LTVs, loan sizes and buyer ages – provide confirmation of growing competition among lenders and a renewed appetite to lend.
 
If there is one major issue at present, it is demand for mortgages. On volumes, there was a 1.3% fall in the number of purchase mortgage applications made in July compared with June. This compares with a 5% rise in application numbers in June on the month before.

Falling volumes are a reflection of how nervous many prospective borrowers still are. With mass-scale public sector job cuts looming, an economy that is still very delicately balanced and the Sword of Damocles that is the base rate hanging above them, many people are choosing to sit on their hands right now rather than commit to buying a house.

So while lenders may have regained their appetites, borrowers, to a certain extent, seem to have lost theirs.


Brian Murphy is head of lending at the Mortgage Advice Bureau, a franchise operation which has a strong presence in estate agents’ offices

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