Fixed rate mortgages gained in popularity in June

48% of new borrowers took out a fixed rate mortgage in June, the highest proportion so far in 2010, according to new data from the Council of Mortgage Lenders. Fixed rates had proved unpopular this year compared to the last several years due to an historic low bank rate with little prospect of the rate rising. But with fixed rate prices falling they are starting to find favour again.

House purchase lending increased significantly in June. There were 52,000 loans advanced (worth £7.6 billion), up 19% in volume (23% in value) from May 2010 and up 14% in volume (27% in value) from June 2009. This is now the twelfth consecutive month in which lending has been higher than its year-earlier levels.

Lending for remortgage also increased, though only modestly, in June. There were 27,000 loans for remortgage, worth £3.4 billion, up from 26,000 (worth £3.2 billion) in May 2010 but down from 34,000 (worth £4.2 billion) in June 2009.

Table 1: Loans for house purchase and remortgage

For the second quarter as a whole, there were 136,000 house purchase loans, worth £19.7 billion. This is 20% higher (by volume and value) than the last quarter and up 17% (by volume) and 30% (by value) than quarter two 2009.

For remortgaging, the second quarter saw 77,000 loans (worth £9.6 billion), up 2% by volume, with no change in value, from the first quarter, but in stark contrast to house purchase lending, the figure was down 20% (by volume) and 19% (by value) from the second quarter of 2009.

There were 52,200 loans (worth £6.2 billion) to first-time buyers from April to June, up from 43,400 (worth £5 billion) from January to March and 85,300 home mover loans (worth £13.5 billion), up from 70,700 (worth £11.2 billion).

Table 2: First-time buyers, lending and affordability

Table 3: Home movers, lending and affordability

	Number of loans	Value of loans £m	Average loan to value	Average income multiple	Proportion of income spent on  interest payments
June 2010	32,200	5,200	69%	2.91	9.6%
Change from May 2010	+19%	+24%	68%	2.91	9.6%
Change from June 2009	+15%	+27%	69%	2.76	11.3%

Credit criteria have become a little more fluid in recent months but remain tight overall, in the context of continuing business and market constraints.

CML economist Paul Samter said:

"For the time being, the effects of government spending cuts have yet to make an impact on mortgage demand, and activity continues on its upward trajectory. 

"But we still expect house purchase activity to be muted in the coming months. Both consumer demand and lending capacity remain distinctly difficult to call, especially in the light of the government's austerity measures and their possible impact."