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Remortgaging on the rise

Sarah Davidson

September 24, 2015

This figure is a new historic record and a 30% increase from July when the average amount was £27,315. It is also 76% higher than August 2014, when the average amount was just £20,219.

Affordability remains manageable after a 3% annual increase in wages far outstripped the minor increase in average mortgage rates, which rose from 2.56% in June to 2.57% in July.

As competitive rates entice borrowers to remortgage the gap between new purchase mortgages and remortgage repayments as a percentage of income has grown.

Annual remortgage repayments account for 17.9% of income compared to 20.9% for new purchase repayments – a difference of 3% and the widest the gap has been since July 2012.

LMS also revealed the number of remortgage loans increased by 18% from 22,900 in August 2014 to 27,080 in August 2015.

However, this was 13% lower than the number of remortgages recorded in July 2015 after remortgage lending slowed following two very strong summer months.

LMS estimated that the value of monthly gross remortgage lending fell by 17% to £4.2bn in August compared to July’s CML figure of £5.1bn (and down from June’s £5.3bn). However, this is an increase of 20% from August last year.

Andy Knee, chief executive of LMS, said: “Rising house prices and low interest rates mean homeowners are withdrawing record sums of cash from their homes by remortgaging without impacting their loan-to-value ratio as evidenced by a drop in new LTVs from 55% to 53% in August.

“However, an increase in average rates for the first time in nine months, however small, is an indication that we may finally be starting to see the end of record low products and competition among lenders as rumours of an interest-rate rise persist.

“Despite a sign that the mood might be starting to turn, annual wage growth and the growing gap between mortgage and remortgage payments mean the affordability of remortgaging is better than it has been for years.”


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