According to the UK’s major banks, borrowers have continued to pay off loans amid an increase in mortgage lending for March.
The British Banker’s Association (BBA) revealed that the number of mortgages approved for house purchase was up 5% on figures for February, with the total standing at 34,905.
They also indicated that current low interest and mortgage rates, have affected borrower’s behaviour, with many choosing to use their surplus cash to pay off their mortgage debt more quickly.
David Dooks, statistics director for the BBA, said: “Homeowners are reducing mortgage debt by making, or maintaining, higher repayments using the extra cash generated by lower mortgage rates.”
There is a continued increase in remortgaging, but it still remains at low levels. Borrowers are avoiding new fixed-rate deals in favour of cheap standard variable rate mortgages, even though two year, fixed rate mortgage deals are at their cheapest for a year.
According to the financial services website Moneyfacts, the average interest rate on a typical £150,000 repayment mortgage was 4.63%.
According to Michelle Slade of Moneyfacts, the best mortgage deals were still out of reach for most first time buyers as they require a 25% deposit but overall, the signs were encouraging.
Ms Slade said: “The open for business sign is back in the window as lenders improve the availability of mortgages.
“Lenders are becoming more active in the mortgage market, which is welcome news for borrowers as increased competition is one of the overriding factors in driving rates downward.”