Mortgage rates are continuing to fall and are now at their lowest ever level, figures from the Bank of England and FCA show.
According to the latest mortgage lenders and administration statistics, the overall average interest rate on gross advances decreased 16 basis points to 2.83 per cent between the first and second quarters. This is the lowest figures since the figures were first collected in 2007.
Over the past month, a number of lenders have increased mortgage rates but, equally, a number have cut their rates. However, today’s figures clearly show the overall trend is that rates are still falling.
Gross advances reached £52.5bn in Q2, which was 15.1 per cent higher than Q1 and 1.9 per cent higher than the same quarter of 2014.
Mortgage Advice Bureau head of lending Brian Murphy says: “The second quarter of 2015 saw a significant boost in mortgage activity, with both gross advances and new commitments on the up. At the same time, average mortgage rates fell to the lowest level seen since the MLAR series began in 2007. This improved affordability has caused a rush of demand from borrowers, and lenders are locked in fierce competition to win their business.”
The proportion of advances at fixed rates edged up from 77.6 per cent in Q1 to 78.9 per cent in Q2.
Murphy believes this shows borrowers are becoming aware that ultra-low rates have a “limited lifespan” as we edge closer to an interest rates rise.
He adds: “As a result, nearly four in five mortgage advances were at a fixed rate in Q2, with growing numbers of borrowers opting for the security of regular mortgage payments and an extended window of paying rock-bottom rates.”
The proportion of advances at an LTV over 90 per cent increased by 0.2 percentage points over the quarter to 3.5 per cent, while the proportion of advances to borrowers with a single income multiple of more than 4 times income increased 0.2 percentage points to 9.3 per cent in Q2.