by Mark Johnston
Remortgaging Levels Fall.
It appears that Remortgage activity in the UK has been pretty subdued for some while, with low back book rates limiting the rationale for borrowers to refinance onto new deals, and generally flat house prices doing little to improve the refinancing options for households with limited equity.
It seems then that in today’s market a significant numbers of borrowers feel that it is the right decision is to remain on a their lenders Standard Variable Rate (SVR),which is a very different decision to the historical norm where customers who stayed put and did not remortgage saw a sizeable increase in their monthly payment.
A recent customer research showed that borrowers are only willing to consider remortgaging if it means their monthly payments become significantly cheaper.
Therefore activity in the remortgage market continues to shrink, with volumes falling by 75 per cent since 2007.
In the second half of 2007, remortgage activity accounted for half of all lending. In the first six months of 2012 however, remortgages accounted for 39 per cent.
Figures from the Council of Mortgage Lenders (CML) show that remortgaging now accounts for 24 per cent of the total gross mortgage lending.
Analysis by Halifax revealed that this change in demand for remortgaging has had a significant impact on the level of lending in the market.
Other recent figures show that Remortgage lending fell 23.4 per cent to £3.1 billion in November with those remortgaging each taking out an average of £19,848 in extra equity, up 14.6 per cent on October’s figures.
Although November’s remortgage lending figure has fallen it is still £114 million more than in August 2012, when gross remortgaging lending fell to its lowest level for 12 years.
The average remortgage loan amount also increased moderately in November, rising by £373 to £138,573. This is a new 2012 peak.
Andy Knee, chief executive of Legal Marketing Services (LMS), said: “The number of homeowners remortgaging in November fell to its lowest level since the credit crunch but, more optimistically, the total value is still higher than the trough of the market in August 2012”.
However, there have been signs of a pick up in activity, in response to increases in standard variable rates by some lenders earlier this year and more attractive refinancing deals.
Brian Murphy, head of lending at the mortgage advice bureau said that he had seen “applications for purchase and remortgaging loans increase by 1.9 per cent since August”. He therefore feels that “this trend is set to continue and grow”.
The Council of Mortgage Lenders (CML) think that it is realistic for the 2012 dip in remortgage lending to be reversed this year, and for activity to match or even slightly exceed the £47 billion level seen in 2011.
Hugh Wade-Jones, director of Enness private clients, added “the market is fundamentally volatile and trends rapidly reverse”.
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