Remortgaging at Low Levels.

by Mark Johnston

Remortgaging at Low Levels.

Before the credit crunch borrowers were actively encouraged to switch to a better deal every few years, but the tide turned during the recession.

Many borrowers were content to sit on their lender’s cheap standard variable rate (SVR), especially after they plummeted as a result of cuts to the Bank of England’s Base Rate.

However, it now seems that home owners choosing to remortgage currently are able to take advantage of some excellent rates from lenders thanks to the government’s Funding for Lending Scheme which has encouraged competition in the remortgage market.

Therefore some experts expect to see more home owners taking advantage of this over the coming months.

There are now dozens of new deals available at less than 3 per cent interest, which is significantly lower than the average standard variable rate of 4.86 per cent. So while it may not have been worth switching a mortgage a year or so ago, it’s certainly worth checking out the deals on offer now.

Figures from the British Bankers’ Association (BBA), the industry’s trade body, showed that just 13,696 remortgages were approved during January 2013

Although in April this year new figures showed that remortgage lending volumes increased by up to 17 per cent which is up from the £2.9 billion recorded in March to reach £3.3 billion and represent the highest proportion of total lending since October 2012,  according to property services company LMS.

Data has also reveals that two thirds of home owners remortgaging their property did so in order to take advantage of better rates.

Total equity withdrawal from remortgaging stood at £454.5 million in April, up £20.2 million on the £434.3 million figure for March 2013.

However, according to recent figures from the Council of Mortgage Lenders (CML) remortgaging levels remain muted as last year saw the lowest number of borrowers choosing to refinance since 1997.

In 2012, remortgaging accounted for 316,000 loans worth £41 billion while in 1997 there were 293,000 loans worth £14 billion.

These figures suggest then that remortgaging is at a 15 year low.

This analysis comes despite a flurry of record breaking low mortgage rates and signs that lenders are becoming increasingly willing to grant mortgages.

David Hollingworth of mortgage broker London & Country said “banks were still offering many of the best remortgage deals, so the figures were likely to be a fair reflection of home owners’ appetite for switching loans”.

Mark Harris, chief executive of mortgage broker SPF Private Clients, added “It may

be that some home owners are holding off waiting for rates to fall further before taking the plunge. However, rates should be looked at in a historical context: two year fixes for less than 2 per cent and five year fixes for less than 3 per cent are by far the best rates we have ever seen.”

In conclusion it appears that these particular figures reflect just how dependent the high street lenders are on government support.

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