Home owners in the UK are remortgaging more frequently than a year ago with new date revealing the highest number of remortgage transactions in August since July 2009.
Rising house prices and record low interest rates helped the number of remortgage loans to reach 36,195, up 8% month on month and 45% year on year, according to the data from property services firm LMS.
However, the overall value of gross remortgage lending fell by 2% from £6 billion in July to £5.9 billion in August, as home owners’ average remortgage loan amount dropped by 6% between July and August from £172,184 to £162,268.
LMS data shows the average remortgage loan-to-value (LTV) fell from 58% in July to 54% in August, the same value registered in August 2015. The firm says that the dip in LTV, coupled with the fall in the average loan amount, suggests that home owners are exercising a degree of caution and access ever cheaper deals by reducing the proportion of borrowing against the value of their homes.
Comparing year on year, those who remortgaged in August 2016 released £31,589, some 11% less than was the case in August 2015, when the average amount released stood at £35,590.
In line with the growth in activity, there are signs of that home owners are remortgaging more often as the incentive to do so grows. In August 2015, the average remortgager had held their previous mortgage for a period of five years and three months. However, August 2016 saw this reduced by eight months to four years and seven months as people are motivated to reassess their current deal.
‘The Bank of England’s decision to cut the base interest rate continues to have a positive impact on the remortgage market. Mortgage interest rates had already fallen to record lows, which along with rising house prices has encouraged a greater number of home owners to remortgage their homes. Indeed, last month saw the highest number of remortgages for seven years,’ said Andy Knee, chief executive of LMS.
‘However, in spite of this rise, home owners appear to be in a more cautious mood than last month, borrowing less in the wake of a couple of turbulent months, both politically and economically, and lowering their LTV in the process. This means, despite a greater level of activity, the value of gross remortgage lending has fallen for the first time since May 2016,’ he explained.
‘A year ago, home owners who remortgaged had waited over five years to do so since they took out their previous loan. In many cases, that length of time will have made a world of difference to the interest rates that are available on the market and the value of their homes,’ he pointed out.
‘With today’s favourable conditions, it is no surprise to see eight months shaved off the average time that people wait to remortgage and there is plenty of incentive for more people to consider acting before the year is out,’ he added.
