The value of remortgaging hit £7.1bn, up by more than a quarter from the month before and the highest amount for almost eight years in the month following the EU referendum, data from LMS reveals.
Rising house prices, declining swap rates and speculation about an imminent base rate change at the Bank of England have all contributed to a favourable outlook for the remortgage market.
Andy Knee, chief executive of LMS, said: “The aftermath of the UK’s vote to leave the EU has not overshadowed an environment that is ripe for remortgaging as product rates plummeted to new lows.
“Homeowners have been quick to capitalise on this and there’s little sign that incentives to remortgage will disappear any time soon.
“People who remortgaged in July did so more frequently than they have for more than six years – no doubt to take advantage of low rates in many cases and reduce their outgoings. Feedback suggests almost two-thirds remortgaged in July to take advantage of competitive rates, highlighting that significant savings are ripe for the taking.
“Although there is little for homeowners to fear in terms of a base rate rise over coming months, many could seek stability by remortgaging and fixing now, and we expect activity to maintain its momentum through the rest of 2016.”
LMS data shows that homeowners are remortgaging more frequently and keen to capitalise on the competitive rates currently available. The term of the average loan that was remortgaged fell by 15% – 9 months – from five years in June to four years and three months in July: the lowest since October 2009. This was also 18% – 11 months – lower than the average for July 2015 (five years and two months) as low rates tempt people to remortgage more frequently.
As the average remortgage loan size increased to £172,184 in July, up 9% from £157,557 in June, the average LTV also increased from 54% in June to 58% in July: a rise of four percentage points. LMS data suggests that more homeowners are remortgaging to fund home improvements and pay off debt is a sign of consumer confidence, despite widespread speculation about the effects of the UK’s vote to leave the EU.
The surge in remortgaging meant the total amount of housing equity withdrawn via this route in July rose by more than a quarter (27%) from £951.8m to £1.2bn. This was the greatest amount for more than eight years, since £1.4bn was withdrawn in April 2008.