John Charcol Monthly Mortgage Index

The John Charcol Mortgage Index is published monthly, tracking three important statistics, based on mortgage business written by John Charcol.  The index is a leading indicator of trends being based on mortgage applications submitted to lenders, whereas figures reported by the Council of Mortgage Lenders (CML) and the Bank of England (BofE) are based on completions, which typically take place 2-3 months after the mortgage application is submitted.

The three statistics tracked each month are the percentage split:

• Between Fixed rates, Capped rates and Tracker/Discount rates*.
• Between Purchases and Remortgages.
• Of First Time Buyers compared to all Purchasers.

John Charcol, the UK’s leading independent mortgage adviser, has revealed that there are signs of new life in the remortgage market, with the proportion of their clients remortgaging having increased from 32.1% in May to 39.2% by July. The remortgage market is now looking increasingly appealing to borrowers and John Charcol expects the remortgage trend within the residential market to increase in August and remain high over the next few months as the fixed rate price war takes shape.

As well as in increase in remortgages, John Charcol expects the proportion of borrowers taking fixed rates to increase in the coming months.  The general feeling is that bank rate will not rise for some years to come – in fact it may even go down later this year - and so trackers are the natural choice in this market. Yet, with fixed rates at all time lows, buying security now is going to appeal to many borrowers, particularly following the hike in standard variable rates by many lenders just a few months ago.. John Charcol fully expects August’s figures to show an even higher percentage of fixed rates taken by borrowers.

Simon Collins, mortgage technical manager, at John Charcol comments:  “There’s no doubt that we are in the midst of a fixed rate price war as lenders start inundating the mortgage market with their newly cut rate products. Even before the raft of new fixed rates, the market was becoming more competitive and remortgaging was starting to pick up again. With these new products many borrowers who are coming to the end of their current deal, can remortgage onto a 5 Year Fixed Rate that’s cheaper than their current lenders Standard Variable Rate (SVR), that they are moving onto. Even those borrowers who have been sitting comfortably on a lender’s SVR can now realistically look to move their home loan.  It’s been a long time coming.”

The fixed/capped/tracker split is heavily influenced by the advice given by John Charcol and it is to be expected that the swings between fixed and variable rates will be much greater than the figures from sources such as CML and BofE.  Their statistics are made up of a mixture of advised and non advised sales and the advice offered by different brokers and lenders will vary.

Definition of First Time Buyers
The percentage of the purchase market taken by FTBs varies depending on definition.  The Council of Mortgage Lenders treats any purchaser who is not simultaneously selling a property as being a FTB. This means that, for example, anyone who is returning to the property market after renting for a period or after a spell working as an expat will be treated as a FTB, as will someone acquiring a second property. As a result the CML estimates that it overstates the number of FTBs by about 25%, although their method of calculation is consistent and so its figures still provide a good indication of trends.

At one time many lenders offered some additional, and usually cheaper, mortgages for FTBs to choose from and lenders’ definition of a FTB varied. A few lenders still offer special FTB mortgages but most don’t and so there is now less reason for borrowers to want to be classified as FTBs in marginal cases in order to qualify for a particular mortgage deal. At John Charcol only genuine FTBs are classified as such but there are situations where it is possible to argue as to whether or not a purchaser is a FTB. The most obvious is where a couple are buying and one is a genuine FTB, but the other either currently or previously owned a property. In this situation John Charcol would not normally classify the purchasers as FTBs, with the possible exception being where the actual FTB is the sole or principal earner.