Repayment Based Mortgages - Becoming First Choice Borrowers
The proportion of residential mortgages taken out on a capital repayment basis reached 77% in Q1 2011, according to Paragon Mortgages.
Repayment mortgages have hit their highest recorded level according to Paragon Mortgages. Repayment mortgage deals have increased by 71% between October and December 2010 and have been growing since September 2007. Prior to 2007, they had reached a 6 year low of 57%. Paragon have reported that in Q1 this year, capital repayment mortgages have accounted for 77% of all mortgages taken out with them.
Interest-only mortgages have continued on a downward trend, and made up around 14% of mortgages introduced in Q1. Interestingly and to confirm the trend, this was the lowest proportion seen since the first 3 months of 2004 and is down from its peak of 28% reported in Q3 2007.
The decline of interest only shows no signs of abating as lenders continue their clampdown. The FSA indicated the demise of interest-only through changes proposed in the Mortgage Market Review and it appears that lenders are positioning their businesses in anticipation of regulatory changes.
Paragon have seen remortgages experience a sharp increase in Q1, accounting for 45% of residential applications from its mortgage broker distribution channel in Q1 whilst house purchases fell from 31% to 26%. The good news is that first-time buyers increased from 15% to 18% during the same period.
The national lender reports that mortgage borrowers continue to anticipate a rate rise, and this is demonstrated in the decline of those taking out tracker rate mortgages. There has been a correspondent increase rise in the number taking out fixed rate deals which have actually reduced in price rather than increased over recent weeks.
Rob Killeen, Business Manager at Capital Fortune commented on the report that “Whilst it shows a general tendency towards better news, the figures on both fixed rates and repayment mortgages indicate a growing caution amongst borrowers in the UK mortgage market. The instability of mortgage rates increasing coupled with anxiety over investment vehicles is seeing a move away from interest only tracker rates”
“This would seem to be appropriate cautionary action” he added.
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