Prospect of Interest Rate Rise Boosted Remortgaging in September, UK Finance Finds

The prospect of an interest rate rise, which was implemented last week, caused a boost to remortgaging activity in September, the latest data from UK Finance shows.

On a non-seasonally adjusted basis, the figures show that total mortgage lending dropped in September, but remained higher than in the same period last year.

First time buyers borrowed £5.1 billion – down by 11% on August, but 4% higher than in September 2016. This equated to 31,100 loans – down by 10% on a monthly basis and 1% on last year.

Home movers borrowed £6.9 billion – down by 18% on the previous month, but 6% higher year-on-year. The number of loans (32,200) was down by 17% on a monthly basis, but 3% higher than September 2016.

Homeowner remortgage activity totalled £6.4 billion – the same amount as in August, but 16% higher than a year ago. This equated to 35,900 loans – 3% lower month-on-month, but 13% higher than 12 months ago.

Prospect of Interest Rate Rise Boosted Remortgaging in September, UK Finance Finds

Gross buy-to-let lending totalled £2.9 billion – down by 9% on August, but 4% higher than in September 2016. This was made up by 18,900 loans – down by 8% on a monthly basis, but up by 4% on last year.

Buy-to-let activity continues to be driven by remortgaging, which accounted for more than two-thirds of total lending. Buy-to-let house purchase and remortgaging activity in September remained at a similar level seen since the change to Stamp Duty on additional properties, introduced in April last year.

UK Finance has also released its data for the third quarter (Q3) of the year, which shows that mortgage lending increased on a quarterly basis.

Homebuyers borrowed £38.2 billion in Q3 – up by 11% on Q2 and 12% on Q3 2016. This equated to 199,600 loans – up by 9% on the previous quarter and 7% on the same period last year.

Within this, first time buyers borrowed £15.7 billion – up by 5% on the last quarter and 9% on Q3 last year. They took out 95,800 mortgages – up by 4% quarter-on-quarter and 5% on an annual basis.

Home movers borrowed £22.4 billion – up by 14% on Q2 and Q3 2016. This equated to 103,800 loans – up by 13% on the previous quarter and 9% on last year.

Homeowner remortgage activity totalled £19.5 billion – up by 14% on Q2 and 11% on a year ago. The number of remortgage loans totalled 110,000 – up by 12% quarter-on-quarter and 10% on Q3 2016.

Gross buy-to-let lending totalled £9.3 billion – up by 11% on the previous quarter and 4% on Q3 2016. This equated to 60,000 mortgages – up by 8% on Q2 and 6% year-on-year.

June Deasy, the Head of Mortgage Policy at UK Finance, says: “Although lending slackened in September, it remained higher than a year ago. Remortgaging was particularly strong, with borrowers seeking to lock into historically low interest rates in advance of the widely anticipated rise in Bank [of England] base rate at the beginning of November.

“Over the last year, the number of loans for remortgaging has been higher than in any period since 2009. Low borrowing rates mean that mortgage repayments as a proportion of income remain at or close to their historic low point. While this ratio may edge upward in the coming months, monthly mortgage payments will remain affordable for the vast majority of borrowers.”

The Managing Director of Enterprise Finance, Harry Landy, also comments: “With recent widespread economic and political uncertainty, it was to be expected that buy-to-let and remortgage activity would feel the effects. We are yet to see how the industry will adapt to the PRA [Prudential Regulation Authority]-enforced changes in underwriting of buy-to-let mortgage applications, and how this will affect lending activity.

“As the impact of new regulation becomes clear, it is as important as ever for brokers to be aware of all the different financing options available to them, including alternative, specialist buy-to-let lenders who can operate on a more flexible basis. Improving education and awareness in this area will be crucial if people are to be able to capitalise on the market opportunities.”

Lea Karasavvas, the Managing Director of Prolific Mortgage Finance, adds: “Both homeowners and landlords took the early hints from Mark Carney, so September represents the tail end of the rush to remortgage on low rates while they lasted. However, owner-occupiers and landlords are not on the same page. Homeowners have been grabbing low rates while they can, while the response from landlords has been far more muted.

“This demonstrates a sustained shift, as many turn their backs on the market. Landlords are waving the white flag after a severe tax bashing from the Treasury over the last two years. This is a statement of intent. Being a landlord is not a hobby, it’s an investment that must pay or it’s simply not worth it.”

He continues: “The number of remortgages by homeowners has risen faster than for landlords in the last year and, more recently, is falling slower. Many landlords are effectively signalling that the good times are over and they don’t intend to stick around long enough to justify committing to a new deal.”