September was worst month for remortgages since referendum

Ryan Fowler

October 31, 2016

Brexit

Remortgaging had the worst month since the referendum in September, according to the latest data from LMS.

The conveyancing panel management specialists said the number of remortgages decreased in the last month, dropping by 12% from 34,900 in August to 30,766 in September.

The value of gross remortgage lending also decreased from £5.9bn in August to £5.1bn in September by 14%.

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Remortgaging accounted for just 25% of total gross lending in September – the lowest amount since March 2016 – when there was a surge in house purchase and buy-to-let activity before the change to Stamp Duty on second homes was introduced.

The dip in remortgaging activity comes at a time when the nation’s economic future appears unclear as the UK approaches the start of formal negotiations to leave the European Union.

The average loan amount rose by 1% from £162,263 in August to £164,394 in September. However, annually, the average loan amount increased by 7% from £154,360 in September 2015.

Andy Knee, chief executive of LMS, said: “The recent weeks and months have been tainted with uncertainty. Since the vote to leave the European Union there has been some doubt and ambiguity surrounding the future of the nation’s economy.

“This uncertainty appears to have spread to the remortgage market, with activity at its lowest level since the referendum. Gross remortgage lending and the share of remortgaging in the wider market have both fallen as homeowners put remortgaging plans on hold to wait and see how Theresa May’s government approach Brexit negotiations.

“The number of remortgages has also fallen as more homeowners remain on their current deals for the time being.

“However, it is not all doom and gloom. Annual repayments have fallen again and mortgage rates are at their lowest-ever level. For those homeowners willing to remortgage, there remains plenty of incentive to do so and many could still benefit by remortgaging onto deals with lower interest rates and repayments – 85% of remortgagors did exactly that in September. Reducing monthly payments is something that will be important for many as inflation increases and the price of everyday essentials rise.”

The average loan-to-value declined between August and September: from 54% to 53%. The average amount of equity withdrawn per person from remortgaging activity continues to fluctuate from month-to-month.

Between August and September, it fell 11% from £31,589 to £28,212. The amount also decreased by 10% year-on-year from £31,241 in September 2015.

However, the frequency of remortgaging has slowed compared to August: up two months, from four years and seven months to four years and nine months in September.

Knee added: “Remortgagors are remortgaging less frequently than a month ago, which is surprising given the current climate market climate of low rates. Homeowners considering remortgaging should act now – mortgage providers may soon raise rates to cover costs stemming from higher swap rates in recent months.”

The average LTV also varied across the different regions of the country – from 58% in the South West to 91% in the North East. In six regions, the average LTV increased or remained the same, while four areas experienced a decrease.

The biggest rise in average LTV was seen in the North East, where it climbed from 77% in August to 91% in September.

The largest fall in average LTV was in the South West, East Anglia and Yorkshire, in each of these regions it fell by 3 percentage points.

Wales and the West Midlands bucked the national trend – as average mortgage terms decreased in these regions.

The average term fell from 4.74 years to 4.57 years in Wales, while it fell from 4.79 to 4.65 years in the West Midlands.

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