The remortgage market is stagnating; that’s the stark conclusion to be drawn from the LMS Remortgage Report, published today.
The report found that gross remortgage lending now represents only 25% of total gross mortgage lending, the lowest proportion since 1999.
August remortgage lending was an estimated £3.17 billion, down 1% on July.
Those remortgaging are taking out £18,000 each of extra equity. This, LMS says, implies a total of £420.5 million equity withdrawal in August from remortgaging.
“Whilst completion levels last month were disappointing these represent cases that started life some time ago,” said Andy Knee, LMS’s chief executive.
“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.”
Borrowers in August were remortgaging every 4 years 9 months on average, down 9.5% from May (5 years 3 months), and down 8.1% from the average for last year (5 years 2 months). Back in 2008 remortgages took place as frequently as every 3 years 7 months.
The loan to value ratio for remortgages averaged 58% in August, the same as it was in July but slightly above the figure for June.
In London, the average remortgage value for August was £221,882, whereas in Wales it was just £92,691, around 42% of the average property value in the capital. London has the lowest remortgage LTV at 47%, compared with 78% in the North West.