Mortgage

New research published today by the Council of Mortgage Lenders has revealed strong growth in the number of people opting for an offset mortgage. During 2006 170,000 offset mortgages were taken out, worth £29.3 billion - equivalent to 7% of all new lending. And, the year-on-year growth of offset mortgages between April 2006 and March this year was 49% (by value) - compared to just 15% for non-offset lending. Offset mortgages combine a mortgage and savings in one account, and offer borrowers a number of advantages, including:

* the option to make on over-payment or an under-payment on the mortgage;

* lower total interest payments and a shorter mortgage term because the interest is charged against a lower mortgage balance;

* any savings the borrower has will earn a rate of interest similar to the mortgage rate, but are not subject to income tax; and

* any savings in the borrower's account help to reduce mortgage interest costs, which helps mitigate the effects of interest rate rises on monthly mortgage payments.

Offset mortgages also hold a number of advantages for mortgage lenders. By requiring borrowers to hold both a mortgage account and savings account with the same firm, offset products help lenders to retain customers.

The research also revealed that the majority of offset mortgages are sold through intermediaries. Over the past two years intermediaries have seen year-on-year growth of offset products increase by more than 100% in some months, and by the end of last year intermediaries accounted for 60% of offset mortgage sales by value, compared to 45% in April 2005.

The profile of a borrower that opts for an offset mortgage is slightly different to other borrowers, according to the research. The average age of an offset borrower is 41, and the product remains most popular with people remortgaging.

Author of the research and Council of Mortgage Lenders statistician Phoebe Zhang said:

"Today's research reflects the dynamic nature of the UK mortgage market. Mortgage lenders are constantly developing new products to meet the needs of borrowers and the fact there are now 250 offset products available in the market illustrates this.

"Going forward, continued innovation by lenders will help to increase consumer awareness of offset products and expand the market potential for offsets in the future."

Mortgage Lending

Gross lending reached a new May record of £30.6 billion according to data from the Council of Mortgage Lenders. The figure is up by 12% on April's lending total of £27.4 billion and is 5% higher than the same month in 2006 (£29 billion). However, the rate of year-on-year growth is not as high as we have seen in the first four months of the year - typically around 12-15%.

CML director general Michael Coogan said:

"While today's lending figure is a new record for the month of May, it does indicate that the market is slowing down following the rapid and sustained growth we saw last year.

"Going forward we expect lending to ease as we progress through the year, but the market will remain in good shape. Although further interest rate rises will continue to dampen demand, we are still on course to meet our prediction of a record £360 billion of lending during 2007."

This news article has been sponsored by MLM Financial - Shropshire Mortgage Specialist

Mortgages

Mortgage interest payments for first-time buyers and home movers have reached their highest levels for 15 years, according to figures from the Council of Mortgage Lenders.

Council of mortgage lenders regulated mortgage survey data shows that first-time buyers in April were paying 18.7 per cent of their income on mortgages interest, the highest level since 1992. This is up from 18.3 per cent in March and 16.3 per cent in April 2006.

Home movers were also hit with the highest mortgages interest repayments in 15 years, reaching 16.3 per cent of income in April. This is up from 16.1 per cent in March and 14.4 per cent in April 2006.

The Council of mortgage lenders also points out 58 per cent of first time buyers were forced to pay tax on their purchases in April, up from 51 per cent in the same month last year.

Council of mortgage lenders director general Michael Coogan says: “Month on month we see affordability constraints for first-time buyers worsening. And with the impact of May's interest rate rise still to be felt, many borrowers face higher costs in the coming months.

"The vast majority of borrowers will be able to absorb higher mortgage payments. But with two million fixed-rate mortgages loans coming to an end over the next year and a half, many borrowers should anticipate that their mortgage costs are likely to rise and should be planning ahead”.