Remortgaging Bolstered by Interest Rate Rise, UK Finance Reports

A surge in remortgaging during June was bolstered by this month’s interest rate rise, according to analysis of the latest UK Finance figures.

The report indicates that 37,400 new homeowner remortgages were completed in June, which is up by 8.4% on an annual basis. This £6.8 billion of remortgaging was 13.3% higher than in June 2017.

Meanwhile, 33,700 new home mover mortgages were completed in the month, some 7.9% fewer than in the same month last year. The £7.3 billion of new lending was 6.4% down year-on-year. The average home mover is 39-years-old and has a gross household income of £56,000, UK Finance found.

For first time buyers, there were 34,900 new mortgages in June, down by 3.6% annually. By value, this £5.8 billion of new lending was 1.7% lower. The average first time buyer is 30-years-old, with a gross household income of £42,000.

The report also shows that 5,400 new buy-to-let home purchase mortgages were completed in the month, some 19.4% fewer than in the same month of 2017. This £0.8 billion of lending was down by 11.1%.

Remortgaging Bolstered by Interest Rate Rise, UK Finance Reports

There were 12,600 new buy-to-let remortgages in June, which is the same as in June last year. By value, this equated to £2 billion – also the same as 2017.

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The Director of Mortgages at UK Finance, Jackie Bennett, explains the data: “Remortgaging continued to dominate in June, with figures up 13% on the same period last year, as existing two and three-year products came to an end and borrowers opted for new deals.

“Despite a boost in recent months, speculation of a base rate rise saw the market remain relatively subdued, with year-on-year declines in activity among both first time buyers and homemovers, as customers adopted a wait-and-see approach.

“House price inflation has moderated in recent months, yet it still remains above earnings growth, and so affordability is still a challenge for would-be borrowers.

“And, although the full impact has yet to be felt, tax and regulatory changes continue to bear down on borrowing activity in the buy-to-let purchase market.”

Shaun Church, the Director at mortgage broker Private Finance, also comments: “Despite numerous pledges and incentives from Government to get more people onto the housing ladder, June showed a disappointing performance in the first time buyer market. Mortgage eligibility remains the key stumbling block for many prospective buyers, so the recent relaxation of lending criteria from major lenders could help boost activity among first time buyers in the future.

“The remortgage rally has continued into summer, no doubt bolstered by the speculation of August’s rate rise. Borrowers may be thinking they have missed the boat to lock into rock bottom rates following the base rate rise, however, rates remain very affordable. Those lingering on a standard variable rate are urged to consider swapping to a fixed rate now, as they could potentially save thousands in the long-run.”

The Group Operations Director at Just Mortgages and Spicerhaart, John Phillips, offers his thoughts: “These latest figures show that the housing market is struggling, especially amongst home movers, where activity is down 7.9%. I think the main reason for this is not that people don’t want to move, but they are reluctant to because Stamp Duty is so high that they are not prepared to shell out thousands of pounds just to move. So, they are staying put.

“The trouble is, while remortgaging is up, which is good – but is more to do with rate rises than anything else – the UK economy needs people to move house, because it has a positive knock-on effect on so many other sectors. So, if the Government wants to fix this, it needs to make a bold statement.

“The Stamp Duty cut has worked for first time buyers, but we need similar incentives for the rest of the market. I would like to see an 18-month suspension of Stamp Duty across the board. This gives the market seven months or so before the Brexit deadline in March, and a year afterwards, to let things settle.”