CML: Remortgaging unlikely to increase
With MPC members voting 7-2 to keep rates on hold in June and commentators predicting that the first base rate rise may not happen until 2012, borrowers with variable rate mortgages are not yet thinking about planning for an increase..
Following the release of the FSA’s Mortgage Lending & Administration Return figures, the CML said: “The increased proportion of remortgaging occurred because of the expectations of a base rate rise in the first quarter. Now that the prospect of that happening soon has diminished, the number of people remortgaging is unlikely to increase.”
Andrew Montlake, director at Coreco, said: “It will certainly reduce demand to a certain extent as people will be happy to stay on variable rates.
“However, I actually think that there are lots more people who would want to remortgage but who can’t because of criteria changes, for instance those who have gone self-employed or who are tied in because of higher LTVs. So I think there is some pent up demand with remortgaging that has nothing to do with whether or not the base rate changes.
“Mortgages have come down to such a degree, with products such as a 1.99% variable rate and two-year fixed-rates at 2.89%, that it still makes sense for a lot of people to remortgage.
“There’s a definite expectation that interest rates will remain lower for longer however that doesn’t necessarily mean people don’t want to remortgage. Even if you’re on the lowest Standard Variable Rate of 2.5%, if you’ve got good equity there are better deals available such as Accord’s new rate of 2.29% followed by a 3-year fixed rate of 3.99%.
“People know that the next interest rate movement will be up and it will probably be in the next 12 months so they may as well take advantage of the low rates now.”