Figures from mortgage lenders show that the number of loans handed out for purchasing homes in the UK rose by 16% in April compared to March.

Even with this rise though, the figures are still 28% down compared to April the previous year according to the Council of Mortgage Lenders (CML).

The figures add to other evidence that there has been a spring rise in the housing market. But first-time buyers are still expected to put down an average deposit of 25% of the value of their new home.

The average amount of money borrowed by first-time buyers rose slightly to £96,000. This is the first rise since May 2008.

Fixed-Rate Mortgages Increase In Popularity

This data is the last of a large set of figures relating the state of the mortgage market in April. They confirm that fixed-rate mortgages are currently popular as homeowners believe interest rates are unlikely to fall further.

This is shown by the fact that just 48% of home loans were fixed-rate in January, compared to 69% in April. The average rate charge on such deals in April was 4.83% - the lowest since January 2004.

Bob Pannell, head of research at CML said: “With the interest rate cycle now at its floor, an increasing proportion of borrowers are taking out fixed rates, including for longer term periods of 5-10 years.

“With expectations for rates to remain low in the near future, shorter term fixed-rate deals are less appealing than attractively priced variable-rate deals.”

Fixed-Rate Mortgages Becoming Unaffordable?

Nationwide Building Society reported that it will increase the cost of its fixed-rate deals on Friday by 0.86%. Analysts believe that other lenders will follow suit due to the sharp increase in swap rates – the amount banks charge each other for borrowing and lending money over a fixed period.

Director of mortgage broker Coreco, Andrew Montlake said: “Lenders are now hiking their fixed rates, partly because swap rates have increased dramatically over the past few days, partly because lenders have too many applicants and too little to lend, and partly because they can.

“What concerns me is that many people coming to the end of their existing mortgage products are still reverting to, or being forced to revert to the standard variable rate (SVR), which could come back to bite them should rates rise sharply.”

CML says that the number of loans for house purchases in April was 35,500. Mr Pannell says: “There are tentative signs of house purchase lending stabilising, but we need to see considerably higher transaction levels to underpin house prices.”

The latest house price surveys show that there is some pent-up demand, but also that there was a squeeze in the number of homes on the market pushing down the prices of those that were available.

What Do You Think?

Is the worst of the housing crisis behind us, or is the upturn temporary? We would love to know your thoughts and opinions. Leave your comments here.