- Gross remortgage lending for July up 13% on June, but at £3.5bn remains low by historic comparisons and down on the same time last year
- Borrowers have been holding back on remortgaging, waiting for more attractive deals
- Borrowers who are remortgaging are typically increasing the size of their loan, releasing an average of £16,000 equity to allow them to pay off other more expensive debts or to improve their standard of living
- The term of the previous, redeeming loan, is typically 4yrs 5mths. This has shortened since 2011 when it averaged 5yrs 2mths (for the year).
- Current very attractive sub 3% remortgage deals suggest a bounce back in remortgage lending later this year
The Council of Mortgage Lenders reported the June remortgage figure last week. It was significantly down, by £700m, on May’s £3.8bn. This estimate for July suggests that monthly remortgage lending is still subdued.
Before June, one has to go back to December 2010 to find a lower monthly figure than July’s gross remortgage lending. Remortgages now represent only 25% of all gross mortgage lending, down from 32% in July last year.
The average remortgage loan amount has risen by over £5,000, to £134,244 in July, the highest since the beginning of this year. Average loan amounts have been gradually rising since February, and now remain consistently above the typical average £125,000 in the years 2009 to 2011. However loan amounts do remain well below the peak of £138,350 recorded back in 2008 which suggests that people are less confident about house prices and thus releasing less equity or have less equity to release due to house price falls.
LMS estimates the number of remortgage loans to have increased by 8% to 26,000 in July, from 23,400 in June, but remains well below the more typical 30,000 during 2011.
Commenting, Andy Knee, Chief Executive of LMS says:
“July’s remortgage lending is still low in the context of the history of mortgage lending. The July value followed a sharp fall in June, itself the lowest remortgage lending figures since December 2010. The low monthly figures reflect the fact that many borrowers, already on competitive existing rates, have had little incentive to remortgage.
"Indeed, most new deals which borrowers could have taken out and completed in June or July would not reduce monthly repayments sufficiently to encourage people to remortgage so borrowers have held off taking any action. However, the good news is that better deals have materialised! Lenders have recently launched a number of sub 3% rates with terms of 4 or 5 years.
"This has led to a real surge in remortgage applications in late July that has continued into August.We had been expecting this to be a disappointing time with the distraction of the Olympics but the reverse has happened. These applications should become completions in late August and September and suggest that we will see a sharp rise in remortgage lending later in the year.”
