Mortgage lending for house purchase reached its highest level for nearly two years in October, up nearly 100 per cent compared to January this year.
Compared to a low point in January, when 23,000 mortgages were taken out for house purchase, this number rose to 55,000 in October, according to the latest figures from the Council of Mortgage Lenders (CML).
The figures from October represent the highest level of mortgage lending for house purchase, as opposed to remortgaging or buy-to-let mortgages, since December 2007.
The number of house purchase mortgages taken out in October was nine per cent higher than the previous month, and up 43 per cent compared to October 2008.
First time buyers are also returning to the market, driving a 34 per cent increase in the first time buyer mortgage market compared to the same period last year, accounting for 19,700 of loans for purchase.
Other sectors of the mortgage industry are not faring as well, however; remortgage lending has remained static for the previous two months at 33,000, down 52 per cent compared to last October, and its lowest level since the CML began collating the data in 2002, with the exception of an even worse lull in August of this year.
Commenting on the data, CML director general Michael Coogan said: "We are still in a two-speed mortgage market." He explained that low interest rates for those with substantial deposits, combined with a steady recovery in house prices, "are encouraging more people to buy or move home."
But, Mr Coogan added, the same scenario of low interest rates which is driving growth in house purchase activity are suppressing the remortgage market, providing "little incentive for borrowers to refinance their loans. This, coupled with ongoing tightness in lending criteria, continues to hold back the remortgage market," he said.
The type of mortgages that borrowers are choosing has also shifted, from a market dominated by fixed rate deals to one where more people are taking advantage of low interest rates by opting for tracker mortgages.
In July this year, fixed rate mortgages still accounted for 80 per cent of all new lending, but by October, this had fallen to 66 per cent. Tracker mortgages, meanwhile, have been rising in popularity, taking 21 per cent of the market in October compared to 12 per cent in July.
Amid much speculation that the Bank of England will maintain the base rate at 0.5 per cent for several more months to come – as it did for the ninth consecutive month this week – borrowers are putting their money on tracker mortgages.
© Fair Investment Company Ltd