Mortgage Rate Trends: When to Buy According to Statistics

2020 was an explosive year for the property market with no signs of slowing down. In 2021, the number of new residential loan offers made totalled 281,054 million – a 20% increase on the previous year.

In this article, we review trends in the mortgage market over the last five years and reveal the best time to apply for a mortgage according to statistics.

Regulated vs. Unregulated Loans

Our analysis uses data from the Financial Conduct Authority’s Mortgage Lending Statistics and largely focuses on the regulated market of residential loans, but what does that mean exactly?

The FCA was founded in 2013, taking responsibility from the Financial Services Authority (FSA). Today, the FCA regulates 51,000 businesses, prudentially supervises 49,000 firms and sets standards for 18,000 firms.

The majority of loans are regulated by the FCA with the exception of ‘buy to let’. Buy to let loans are not usually regulated as they’re considered to be a business transaction and sit outside the bounds of the FCA.

Mortgage Market Trends

Mortgage Purpose

The majority of residential loans in 2021 were for a house purchase as opposed to re-mortgaging. This amounted to 60% of all new loan offers, with an estimated value of 191,536 million.

 

YearReason %Millions
House purchaseRe-mortgageOther
201768.126.45.4230,357
201866.328.15.6240,480
201959.534.65.9243,911
202057.936.55.6234,291
202159.634.65.8281,054

 

Reason for regulated residential loan in % for years 2017 – 2021

 

Mortgage Interest Rates

Interest rates year-on-year have decreased. Interest rates have hit a 5-year low in 2021, sitting at 2.09% across all regulated residential loans.

 

YearInterest rate %
20172.17
20182.21
20192.21
20201.97
20212.09

 

Interest rates of regulated residential loan for years 2017 – 2021

 

Fixed-rate vs. Variable Mortgages

Fixed-rate mortgages have a lower interest rate than variable, and this has remained stable across the last 5 years. In 2021, fixed-rate mortgages were 0.06 percentage points – a variation of 3% – lower than variable.

 

Interest Rate %
YearFixedVariable
20172.172.21
20182.192.41
20192.192.42
20201.981.94
20212.092.15
Average2.122.23

 

Interest rates of fixed and variable rate regulated residential loans for years 2017 – 2021

 

Loan-to-Value (LTV)

The majority of mortgages have been taken out with a LTV of greater than or equal to 75%. This means in 2021 that 59% of those applying for a mortgage were putting down 25% or more as a deposit.

Average %
Year< = 75%Over 75 < = 90%Over 90 < = 95%Over 95%
201760.934.24.50.3
201859.536.04.20.2
201956.337.55.90.3
202057.438.34.00.3
202158.538.23.00.2

 

LTV of regulated residential loans for years 2017 – 2021

 

First-time Buyers

First-time buyers made up 39% of the regulated market in 2021. This was a decrease of 2 percentage points on the previous year – a -5% variation.

As a percentage of the total residential loan market, including unregulated, first-time buyers made up 33%. This is a 0.2 percentage points decrease on the previous year: a small shift indicating a relatively flat trend.

 

Regulated (Avg %)Unregulated (Avg %)Combined (Avg %)
YearFirst timeOtherBuy to letFirst timeOtherBuy to letFirst timeOtherBuy to let
201740.559.30.70.10.699.332.147.220.7
201841.558.00.50.30.999.033.046.320.7
201941.458.20.30.10.599.333.046.520.4
202040.858.80.40.20.499.432.747.320.0
202138.760.90.40.10.499.532.551.316.2

 

Regulated and unregulated residential loans for years 2017 – 2021 by % first-time buyers, other and buy to let

What’s The Best Time To Apply For a Mortgage?

If you’re looking to apply for a mortgage, the best time to do so is between October and December.  This is when interest rates sit at their lowest. In fact, the average interest rates of quarter 4 across the last 5 years are between 0.04 and 0.08% points lower than the other quarters of the year.

While 0.08% may seem a miniscule number, if you were to take out a mortgage for £270,000, with an interest rate of 2.16% over 25 years, you would pay back an estimated £3,120 more over the term.

 

QuarterInterest rate %
Q12.16
Q22.15
Q32.12
Q42.08

 

Regulated residential loan interest rates by quarter for years 2017 – 2021

 

Prosperity Wealth aims to provide independent financial advice that’s tailored to our client’s needs. We offer residential advice for mortgages and equity release, retirement and pension advice and wealth management, such as advice on inheritance tax

We also assist our commercial clients with advice on Venture Capital Trusts, EIS tax relief and employee benefits, and more.

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