Remortgages increased share of home lending market in UK last year
There was a definite shift in borrowing type in the UK housing market last year with remortgage business increasing in each quarter, new data shows.
There was a 7% rise in remortgage borrowing with this sector accounting for 39% of all mortgages handled, according to the latest financial advisors confidence tracking index report from Paragon Mortgages.
The figures based on information from mortgage intermediaries also show that almost half of fixed rate mortgages are now for longer than two years.
The increase in remortgage activity among intermediaries echoes industry statistics published from the Council of Mortgage Lenders (CML), who last month reported that there were 34,700 loans for remortgage in December worth £5.8 billion, a year on year rise of 13% in volume and 14% in value.
Next time buyers are now the second most common type of borrower having overtaken buy to let lending accounting for 23% of mortgages handled. Buy to let lending fell away in the second quarter of the year following the increase in stamp duty but had recovered by the fourth quarter to 19.3% of all business.
The figures also show that although the number of first time buyers fell by 2% decline in the fourth quarter of 2016, their 18% share of mortgages handled remained stable compared to the fourth quarter of 2015.
In terms of interest rate type, there is a clear preference among borrowers for fixed rate mortgages, which accounted for 83% of all cases in the fourth quarter and this sector has increased year on year since 2010. Tracker mortgages remain a distant second at 14% of all cases, representing little change over the course of 2016.
Initial fixed or tracker periods of two years are still the most popular products, making up 53% of all cases in the final quarter of 2016, an increase of 5% on the same quarter in 2015 while longer term products of more than two years accounted for 46% of all cases with five year fixed products the second most popular with 33% of all business.
Capital repayment mortgages were the most common mortgage type, accounting for 80% of products sold in the fourth quarter of 2016 and although this was a decline on the previous quarter it has increased on the year and continues a slow growth in share dating back to 2007.
Since interest only lending was scaled back and stricter affordability rules imposed in 2009, the proportion of interest only mortgages declined to as low as 14% and has since remained stable. Despite a slight increase in the fourth quarter, interest only mortgages still account for less than 20% of all cases.
‘Our survey data shows increased levels of activity over 2016 driven particularly by borrowers remortgaging to better rates. These are as likely to be longer term fixes as they are short term deals which bodes well for customer resilience in an uncertain market,’ said John Heron, managing director of Paragon Mortgages.
‘Buy to let had a very strong start to the year with customers looking to beat the stamp duty deadline. There was an inevitable decline in lending in the second quarter of the year but volumes have slowly improved as landlords have developed their strategies to mitigate higher taxes on rental income,’ he added.
