Attractive SVRs and fixed-rates driving market: MAB

The MAB’s national mortgage index showed remortgage applications in May grew by 21 per cent year-on-year, while mortgage applications grew 16 per cent over the same period.

Brian Murphy, head of lending for the national advisory firm, attributed the rise to the availability of fixed-rate products and more clients looking around for deals as lenders increase their standard variable rates.

He said: “Average two-year fixed rate mortgages having risen month-on-month since September 2011 and three and five-year fixes also both having risen month-on-month from December 2011.

“Add to this the fact several lenders have raised their SVRs recently, and it is not surprising we have seen an uplift in the number of remortgage borrowers.”

Mr Murphy added that with the average loan-to-value of remortgage borrowers reducing significantly during May it appeared a number of borrowers with high levels of equity, who have until now refrained from remortgaging, were now entering the market and “taking advantage of what are still – by historic levels – extremely attractive rates”.

Dave Penny, managing director of Somerset-based Invest Southwest IFA, said he has experience an increase in demand among clients.

He said: “There is a significant minority of borrowers who are on the SVR and who have been nervously watching how variable rates change. The weight of media coverage in the second quarter of this year did for a while give the impression that rates were on the verge of rocketing.

“Common sense and subsequent economic data contradict this view and it is now clear that the SVR rises were merely correcting rates which were anomalous. Rates are not about to hit the roof and variable rate borrowers can relax for the next year or so at least.”

Mr Penny predicted little change in the housing market. He said: “Looking at the wider picture, the housing market remains, and will remain for the foreseeable future, depressed with the consequent knock on to the mortgage market.

“Remortgages will always be relatively active. But new lending is so quiet, it’s not just in the toilet: it’s been long flushed and is halfway to the local coastal overflow.”