UK Mortgages Rise as Rates Fall

The number of mortgages take out for house purchases and remortgages increased in February, figures from the Bank of England showed, as rates continued to fall and lenders got to grips with affordability rules.

The average cost of a two-year fixed-rate mortgage for a borrower with a 25% deposit fell below 2% for the first time ever, the Bank’s data showed, while five-year fixed-rates edged close to 3%.

Mortgage brokers said fierce competition between lenders was increasing the options for borrowers, as well as pushing interest rates down to record lows.

During February, 61,760 mortgages were approved for house purchases, compared to an average of 60,750 over the previous six months, the Bank said. There was also an increase in mortgage activity, with 32,099 borrowers switching to new lenders, against the previous six-month average of 31,687.

The seasonally adjusted figures showed that while the total value of house purchase loans dropped – from £10.7bn in January to £10.2bn in February – the value of remortgages went up from £5.1bn to £5.3bn.

Although the Bank base rate remains at 0.5%, the receding likelihood of an interest rate rise in 2015 has a sparked a mortgage price war between banks and building societies which has been driving the cost of home loans down since the summer.

The average cost of a two-year fixed-rate mortgage at 75% loan-to-value fell to 1.96% in February, the Bank said, while a five-year fixed-rate at the same level came down to 3.05%.

via The Guardian

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