UK Re-Mortgaging Up as Borrowers Lose their Bottle and Fix Rates

11 October 2011

At last remortgaging in the UK is rising, but no one is agreed on whether this is a good thing or a bad thing. Certainly, the whole damn mess was partly caused by too many people remortgaging too much too often. It was certainly worsened by the number of people this cycle of remortgaging left buried in untenable negative equity once prices started to fall.


For better or worse some 34,100 borrowers re-mortgaged in August according to data released today by the Council of Mortgage Lenders, a growth of 33% compared to August 2010, and of 9% compared to July. The rise is being put down to a rise in the number of people giving up on the gamble, and fixing at the current low rates.


The CML was quick to point to the fact that last August was one of the worst months on record for remortgaging. It also reminded us -- as if it were necessary -- of the effect fears over just when rates will rise continue to have on remortgaging figures as these fears ebb and flow.


One poignant thing about the data was the stark difference between re-mortgaging growth and that of lending to first time buyers. According to the data just 19,000 first time buyers managed to get a mortgage in August, a growth of 5% compared to last year, and 5% compared to the previous month.


Also of note was the growth in the average loan-to-value ratio from 77% in August 2010 to 80% in August this year. This is hardly likely to stoke the flames of excitement, but according to the CML it is an indication that terms are easing, and 3% of the UK average house price is not far off £5000, depending on which index you read of course.


Paul Smee, director general of the CML, noted that despite the anxieties that turbulence in the eurozone has sparked for lenders, there is clearly demand for mortgage loans in the UK. "With those moving house experiencing a record low in the proportion of their income needed to pay their mortgage interest", he said, "it is clear that the low rate environment is a benefit to those with mortgages, even against the backdrop of the gloom in the wider economy."

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