The housing market may be enjoying a surge of activity, but it seems that not every sector is going in quite the same direction. Take remortgages, for example. Latest figures from LMS have revealed that the number of home loans advanced to remortgage customers fell to 19,287 in March, a drop of 19% from the previous year’s figure of 23,900 and marking the lowest monthly total since 2005.
The value of this remortgage lending also fell, this time posting a monthly drop of 14% – down to £3.02bn from £3.5bn in February – and representing a 3% fall from the same time last year. As a result, the remortgaging sector now accounts for just 20% of market share, down from 24% in February and 27% in March 2013.
So, just what’s led to this reluctance to remortgage? Well, further analysis suggests that it could be a result of lenders tightening up their criteria in anticipation of rule changes following the mortgage market review (MMR), due to come into play tomorrow, and as remortgage applications are usually quicker the effects are already being felt.
Lenders will be required to apply additional affordability checks to all mortgage applications, including remortgage customers, and with many having already adjusted their affordability criteria it’s thought that the perhaps expected consequence – that fewer people will be accepted for a mortgage – is being realised.
Despite these falls, however, those customers that are remortgaging seem to be opting for bigger loans. The average remortgage loan amount stood at £156,626 in March, up 1% over the month and 12% higher year-on-year – also making it the highest figure seen since monthly recording began in 2002 – while the average amount of equity released through remortgaging has increased too, this time by 20%.
“This indicates that savvy borrowers are still benefiting from the remaining competitive deals on offer,” said Andy Knee of LMS, with borrowers “clearly adept at searching for the best deals around with 61% remortgaging to take advantage of a new, lower mortgage rate”.
However, although many are choosing to take the plunge before mortgage rates start to rise, some 10% are remortgaging to pay off other debts. This would perhaps indicate that many households are still finding their budgets increasingly squeezed, but ideally remortgaging to a better rate should help the budget remain manageable for a bit longer.
There are plenty of great deals to be had as well, particularly for those that have built up a valuable amount of equity in their home. Variable rates can be found from as little as 1.95% for those seeking to remortgage at 70% LTV, while even those who haven’t been able to pay off as much needn’t lose out – Market Harborough Building Society offers a discounted variable rate of 2.56% at 80% LTV, while Post Office can offer budget security with a rate of 3.39% fixed for three years.
It could be a great time to search for that remortgage deal, particularly with the prospect of a rise in base rate on the horizon, so taking the plunge now could lead to great cost savings. Hopefully the MMR rules won’t have too much of an impact, so take a look at our pick of the best rates and see if you could add to the remortgage levels over the next few months.