Mortgage applications for house purchase were higher than for remortgaging in May, for the first time since 2007, suggesting that the market could be showing signs of recovery.
According to the latest Monthly Mortgage Index from mortgage
advisors John Charcol, there has been a sharp rise in purchase activity in 2009 compared to last year, with purchases accounting for more than half of all new mortgage applications in May.
In 2008, mortgage applications for house purchase represented an average 25 per cent of John Charcol's business, but this year, they have been taking a growing share, to reach 53.4 per cent last month.
The index also shows that enquiries for new mortgages have spiked in recent months, especially for purchase, which accounted for 59.7 per cent of enquiries in May, compared to 49 per cent in April.
Commenting on this year's figures, Ray Boulger, spokesperson for John Charcol, said: "This suggests that as these enquiries translate into actual business, the proportion of purchases in our business written will continue to rise over the next few months.
"It seems that the market is continuing to show positive signs of recovery."
And, as industry experts predict that interest rates have bottomed out and issue warnings that mortgages are to become increasingly expensive in the coming months, fixed rate mortgages
remain the most popular choice of home loan.
Almost 80 per cent of John Charcol's mortgage business in May was for fixed rate deals, which, Mr Boulger comments, "highlights that people are keen to seek refuge from the stormy economy and ensure they know exactly what they are paying each month for the foreseeable future."
He adds that with the recent shift upwards that has already occurred in the fixed rate mortgage market, "next month's figures will be particularly interesting."
Meanwhile, the Council of Mortgage Lenders' results for May reveal a more subdued outlook, with gross mortgage lending falling two per cent compared to April, and down 58 per cent on May 2008.
Despite the slight rise in mortgage applications for house purchase, also reflected in figures from the Bank of England, overall figures are being dragged down by a decline in remortgage lending.
Remortgaging has fallen in recent months as a result of tighter lending criteria for the most attractive deals, encouraging borrowers to stick with their existing deals.
"While recent signs from the housing market have been more encouraging, we do not anticipate a significant recovery in activity in the coming months," said CML economist Paul Samter. "Lending volumes appear to have stabilised at extremely low levels, but the weak labour market and lenders' limited access to funding will constrain activity for some time yet."Get mortgage quotes and advice »
© Fair Investment