Application of first time buyers up 80% from the previous month
There are tentative signs that first time buyers in the UK are returning to the market with the latest mortgage index from Charcol showing that the number of applications jumped 80% in a month.
Purchase mortgages are now at their highest level for many years with more than six in ten 10 mortgages in July being for purchases and initial signs indicating that August will be even higher.
‘For the first time in what we believe is decades, the proportion of mortgages for purchases broke the 60% barrier in July, revealing a certain confidence in the future of the market,’ said Drew Wotherspoon, director of marketing at Charcol.
‘There is much talk of a double dip and a large correction in the housing market still to come but these figures would certainly go some way towards questioning this theory. The rule book may well have been ripped up when the crunch began but the old adage of supply and demand still holds true. Whilst we have limited new stock demand will always outstrip supply in the UK,’ he explained.
‘The last few years have taught us to expect anything, but a further large drop in prices looks very unlikely,’ he added.
With the number of applications from first time buyers jumping 80% in July, they are now at their highest level since February. ‘This perhaps suggests that first timers are willing to dip their toe into the market again after sensibly putting any plans on hold pending the outcome of the election and subsequent emergency budget,’ said Wotherspoon. But he warned not to take too much from one month’s figures. ‘It will be interesting to see over the coming months if the trend does continue,’ he added.
The report though shows that remortgaging is still in the doldrums. Just two years ago it accounted for 75% of the market, whereas it is now just 40%. ‘With tightening of lender criteria and many people reverting to reasonably attractive rates there is little surprise in this but borrowers should definitely keep their eyes on the ball,’ said Wotherspoon.
‘Logic dictates that a move in bank rate will spur some people into action but many shouldn’t wait for that. Increasing numbers of borrowers would be better off if they moved,’ he added.
The report also shows that variable rates are still dominant. ‘Even with the improvement in pricing of fixed rates recently, borrowers are showing little signs that they believe it is time to take long term security. Despite the best attempts of some market commentators to scare the entirety of UK borrowers by suggesting we could have 8% interest rates soon, variable rates are still, in our opinion, the product of choice. We would be surprised if bank rate was anywhere near that level by the end of 2015,’ explained Wotherspoon.