Remortgaging Demand in the start of 2013.

by Mark Johnston

Remortgaging Demand in the start of 2013.

It appears that before the credit crunch borrowers were actively encouraged to switch to a better deal every few years.

But more recently with the bank of England keeping its base rate at its historical low of 0.5 per cent, many borrowers have got a better deal by simply doing nothing and staying on their lenders standard variable rate (SVR).

However, just last year borrowers saw the dangers of remaining on their lenders standard variable rate (SVR) when the likes of Santander, Co-operative bank, Yorkshire bank and the Halifax decided to unexpectedly raise their rates.

Therefore, many mortgage experts now reckon that 2013 could be the year in which borrowers decide to move from their lenders standard variable rates (SVR) and on to a more competitive deal.

Figures estimates that the total number of remortgage loans in January 2013 increased by 5.5 per cent to 20,332 which equates to £2.9 billion. This also means these figures are up from 19,279 seen in December 2012.

It is now believed that remortgage lending now accounts for 28 per cent of gross mortgage lending and there are expectations of further growth this spring.

Andy Knee, chief executive of LMS, a remortgage specialist firm, said “the remortgage market has resisted a normal season downturn, reaping the benefits of competitive rates which are now available because of the government’s funding for lending scheme”.

Due to the funding for lending scheme a mortgage war erupted in the autumn of last year and it shows no signs of abating in 2013.

Data shows that 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 (SVR) of 4.86 per cent.

However, according to the latest figures from the Council of Mortgage Lenders (CML) the total gross remortgage lending in January 2013 is still 26.2 per cent lower than the same time last year.

The British Bankers Association’s (BBA) figures also show that the number of remortgages approved by banks fell to its lowest level in 15 years.

Mark Harris, chief executive of mortgage broker SPF Private Clients, suggested that he was “surprised that the current raft of competitive rates had not attracted more borrowers”.

Experts believe that there is still a significant proportion of home owners are not aware of the savings they could make by remortgaging.

David Hollingworth, of mortgage broker London and Country, suggests “some home owners maybe holding off waiting for the rates to fall further before taking the plunge”.

Rates however 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 that have ever been seen.

A recent survey of mortgage lenders by the bank of England showed that they believe that lending to those borrowers with smaller amounts are to increase. This is important as it will open up remortgaging to a swathe of borrowers who were previously labelled mortgage prisoners and were unable to switch.

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