Mortgage product choice climbs as lenders grow more confident about the outlook

Mortgage product choice is now at its highest level for a year, in a sign that lenders view the outlook for the property market as increasingly benign.

There are now 5,264 options available to borrowers, the highest count since February 2022, according Moneyfacts data. Product choice has more than doubled since the October mini-budget.

Options within the 75% and 85% loan-to-value tiers are at the highest level on record. Meanwhile the average shelf life of a mortgage product has climbed to 25 days, from just 15 days in October 2022.

Data covering activity and lending suggest that conditions improved markedly at the onset of spring, though both remain subdued relative to the levels of last year. Transactions climbed by 1.3% to 89,560 in March, the first increase in five months. Meanwhile mortgage approvals for house purchase, a leading indicator of future borrowing, climbed 18% in March to 52,011. Both remain 14% and 22% below last year’s readings, respectively.

The recovery is likely to be a slow process.?Almost half of mortgage holders are yet to refinance since the Bank of England started raising interest rates, and about 1.6 million households will see their fixed rate deal expire this calendar year, according to a recent study by the Resolution Foundation. Those households will face an average increase in their annual mortgage bill of around ￡2,300 if they re-fix, the group said, though there will be significant variation by borrower.

That will limit activity over the coming months, but a protracted period of falling sales and prices now looks unlikely. Indeed, the latest Royal Institution of Chartered Surveyors (RICS) national survey of estate agents pointed to a largely stable trend in sales activity over a twelve-month time horizon.

The Bank of England raised the base rate this month for the twelfth consecutive time, bringing the rate to 4.5%, the highest level since 2008. As we explored last week, the move poses tricky questions for borrowers seeking to remortgage. Some are choosing to lock their rate for five years, though most are weighing fixing for two years or waiting on a tracker for interest rates to fall. Both are running around 0.2% - 0.3% above base rate.

Which of the two ends up being the cheapest option will depend on the path of inflation. While the UK’s official reading of inflation is likely to fall notably in the coming months as the worst period of the energy crisis falls out of the annual comparisons, goods prices are easing more slowly than policymakers had hoped. Economic consensus suggests the Bank of England will only cut the base rate to 3% by the end of next year and 2.5% by the end of 2025.

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