The Council for Mortgage Lenders reported the July remortgage figure earlier this month. It was significantly down on May’s £3.8bn, by £600m. This new estimate for August, based on LMS’s many thousands of conveyancing transactions that month, suggests that the remortgage market is remaining stagnant.
This figure is 26.3% lower than this time last year (£4.3m in August 2011), and the last time that there was a lower monthly figure was back in December of 2010. Remortgages now represent only a quarter of all gross mortgage lending down from 33% in August last year. This is the lowest proportion of total mortgages for 12 years (December 1999).
The average remortgage loan amount has risen by over £2,600, to £135,427 in August, the highest since the beginning of this year. Average loan amounts have been gradually rising since February and August’s figure is the highest it has been since January 2009 (£138,322).
Although loan amounts continue to be below the peak of £138,350 recorded in December 2008, they are 11% up on this time last year (£125,000), which represents a significantly higher growth than house price inflation (of 7.5%) over the same period. People are taking out larger loans to release equity, either for spending or repaying off other debts.
LMS estimates that the number of remortgage loans will decrease by 3% to 23,400 in August, from 24,100 in July, remaining well below the more typical 30,000 during 2011.
Commenting on the results, Andy Knee, Chief Executive of LMS says:
“Whilst completion levels last month were disappointing these represent cases that started life some time ago.
“In August we saw a significant uplift in new business and this is now beginning to flow through into completions. Therefore September and October are expected to be much stronger months for remortgage lending as customers complete their switches to one of the numerous long term fix rates at below 3%.
"With September new application levels having stabilised at this higher run rate we can expect a strong end to the year for the remortgage market.
“However remortgage lending as a proportion of overall lending may still appear subdued as we are also seeing a significant uplift in house purchase activity driven by the government's New Buy scheme. Many of these customers and the builders they are buying from will be highly motivated to complete their purchase before the end of the year so I am anticipating a strong end to the year for purchase lending too.”
