Range of mortgage products widest in five years

Consumers’ choice of mortgages reached record levels in July 2013 with more products on offer than at any time since the housing market crash, according to the National Mortgage Index from Mortgage Advice Bureau.

The number of mortgage products available last month exceeded 10,000 for the first time in almost five years (since September 2008). July’s average of 10,262 meant that consumers’ product choice has improved 33% in the last year, 97% in the last three years and a staggering 198% since July 2009.

Using data from more than 500 brokers and 800 estate agents, the National Mortgage Index also shows that the average purchase mortgage rose for a fifth successive month.

The typical homebuyer borrowed £159,391 in July, up by 6% since the start of the year. In comparison the typical homebuyer salary has grown at just half this rate since January, with a 3% increase bringing July’s average to £40,792.

This has meant the average loan to income ratio has crept up slightly, but is little changed from July 2012. It suggests that brokers and lenders are keeping the emphasis on affordability and responsible borrowing despite growing consumer appetite for buying residential property.

Having completed its first year of operation, the Funding for Lending Scheme has now brought average fixed rates down by at least one percentage point across two, three and five year products.

The biggest drop has been in the average two year fixed rate, with five year rates falling marginally further than three year rates.

As a result July 2013 saw 92% of homebuyers applying for fixed rate deals over variable rate deals (vs. 79% in July 2012) while 91% of homeowners made the same choice when applying to remortgage their property (vs. 77% in July 2012).

The average borrowing for remortgage deals has increased by 7% in the last year from £150,389 in July 2012 to £160,809 in July 2013.

With the typical equity put forward for remortgage applications having fallen by 16% over the same period – from £131,290 to £110,659 – homeowners are clearly borrowing more relative to the value of their property than they were a year ago.