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Remortgage market predicted to grow

The number of people opting to remortgage is expected to reach a peak later this year.

Research from Moneyfacts, published today (April 23), showed the interest rates for those who took out a two-year fixed mortgage in 2017 would more than double when they were transferred to the lender’s standard variable rate.

For example, the average two-year fixed rate in May 2017 of 2.30 per cent is set to hike to the current SVR of 4.89 per cent in May of this year.

Moneyfacts reported the average two-year fixed rate reached a record low of 2.2 per cent in October 2017.

Therefore, the projected average difference in the revert rate will increase from 2.59 per cent to 2.69 per cent, increasing the motivation to remortgage.

By comparison, the revert rate was less than 1.5 per cent at the start of 2017 and from 2009 to 2012, consumers made money when switching to the SVR from their fixed rate.

Last week, lending trends from UK Finance showed the remortgage market was on the rise. About 18,200 people remortgaged their home to gain extra funds in February — 10 per cent up on February 2018 — and those remortgaging without borrowing money increased by 7.8 per cent to 18,360.

Darren Cook, finance expert at Moneyfacts said: “Two years ago, the average two-year fixed mortgage rate fell notably, reducing from 2.31 per cent in January 2017 to a record low of 2.20 per cent in October the same year.

“The following month, the Bank of England increased base rate from 0.25 per cent to 0.5 per cent and the average two-year fixed rate increased to 2.35 per cent by December 2017. In comparison, the average two-year fixed rate currently stands at 2.47 per cent.

“Over the next six months, it is likely many mortgage borrowers who secured a two-year mortgage deal two years ago may see their record low interest rate expiring and will have no intention to revert to a rate that could see their interest rate double overnight.

“This significant increase in motivation for borrowers to switch mortgage deals, and the subsequent potential increase in remortgage business as a result, may push some mortgage lenders to marginally cut rates over the next few months to maintain a competitive edge.”

Daniel White, of White Financial Services, said he was not convinced the low rates would lead to a boom in the remortgage market.

He said: “Two-year fixed rates have been low for some time, so when someone is faced with reverting to a SVR it will of course have a huge impact on the expenditure the consumer has budgeted for.

“However, whether or not the remortgage market will see a huge increase remains to be seen. Given that rates are very low and very competitive, it seems that current lenders are offering very competitive rates to keep hold of the existing client which may then prevent them from remortgaging to a new provider.

“In addition, any change in circumstances may well prevent a client from switching providers and therefore will need to remain with the current provider and switch onto a new product with them.”

By Imogen Tew

Source: FT Adviser

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October remortgage levels reach ten year high

The remortgage market has reached its highest level in a decade bolstered by competitive rates, according to the latest UK Finance figures.

In its mortgage trends update out today (December 12), the trade body reported 50,500 homeowner remortgages completed in October, representing an increase of 23.2 percentage points on the previous year.

At a value of £9.2bn this was 22.7 percentage points higher than in October last year.

The first-time buyer market also saw reasonable growth in October, increasing by 8.2 percentage points on the same month a year earlier to reach 32,900 deals.

UK Finance found the average first-time buyer in the month was aged 30 with a gross household income of £42,000.

Jackie Bennett, director of mortgages at UK Finance, said the figures showed homeowners were taking advantage of a competitive market and locking into attractive deals.

She added: “This also reflects the large number of fixed rate mortgages coming to an end, which is expected to continue into 2019.

“There has been relatively strong growth in the number of first-time buyers, with schemes such as Help to Buy providing vital support to those getting a foot on the housing ladder.”

The government’s Help to Buy scheme was extended in the Autumn Budget, now due to end in 2023.

In keeping with recent trends, the buy-to-let purchase market continued to soften in October with 6,100 new buy-to-let home purchase mortgages completed in the month – 9 percentage points fewer than in the same month a year earlier.

As a value, this was £0.8bn of new buy-to-let purchase lending in the month, 20 percentage points down year-on-year.

However, the buy-to-let remortgage market increased to 15,700 completions – some 5.4 percentage points higher than the same month a year earlier, at a value of £2.5bn.

Jonathan Harris, director of mortgage broker Anderson Harris, said borrowers were continuing to take advantage of cheap rates, fuelled by continuing uncertainty around Brexit and the economy.

He said: “With the number of new purchases remaining subdued, lenders are focusing on where the business is and offering competitive deals to those coming off fixed-rate mortgages – this trend is set to continue into 2019.”

Mr Harris said landlords were also remortgaging as they made their property portfolios work harder and squeezed out every bit of profit they could.

He added: “First-time buyers are taking advantage of the lack of competition from landlords for smaller properties, such as one-bedroom flats, and we expect this to continue into next year.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, said whilst the figures were a little historic, they did reflect what has been seen on the high-street.

He said: “Buyers and sellers are trying to find an accommodation on price, with affordability just as important as Brexit when it comes to decision making.

“First-time buyers, in particular, are taking advantage of reduced competition from buy-to-let investors still compromised by recent tax and regulation changes.”

Mr Leaf added: “Political shenanigans seem to be more of a preoccupation among buyers in the southeast than elsewhere.

“It remains to be seen how the turmoil of the past month or so plays out in the market but the signs are so far that early new year activity will continue in a relatively subdued manner, much as it has over the past few months.”

Source: FT Adviser

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There was a spike in remortgage completions ahead of the base rate rise

Over three quarters (76%) of remortgage applications via intermediaries resulted in a completion during Q2 2018, up from 70% in the previous quarter, as activity spiked ahead of the Bank of England’s anticipated decision to raise interest rates above 0.5%.

The Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA) found for the second time in the last 12 months, the number of homeowners acting to protect themselves from the effects of higher rates and secure the most affordable deals on offer increased in the quarter.

This was directly before a much-anticipated, albeit modest, increase in the  Bank of England’s base rate.

Kate Davies, executive director of IMLA, said: “The last 12 months have seen the end of a decade of record low interest rates that many borrowers have become accustomed to.

“The Bank of England’s response to managing rising inflation had been widely anticipated by the industry and consumers, and it is inevitable that many borrowers will have sought to take advantage of opportunities to lock into very low-rate deals while these are available.

“While customers who remain on tracker and standard variable rates are having to adjust to a second increase in monthly loan repayments in twelve months, competition in the market remains strong and should ensure keen and competitive pricing.

“The enhanced affordability rules introduced in April 2014, following the Mortgage Market Review, were specifically designed to ensure that borrowers would be able to absorb rate increases without suffering detriment.

“For those who took out their mortgages before that date, some may be eligible for further support from the commitment, made by more than 90% of lenders in response to the FCA’s recent Mortgage Market Report to help borrowers switch to better offers.”

A similar spike in activity occurred in Q3 2017 – ahead of the first rate rise in a decade in November, from 0.25% to 0.5%.  At that time, 78% of applications led to completions, an increase from 59% in the previous year.

Data from UK Finance shows that 115,00 homeowner remortgages were completed in Q2 2018, with a combined value of £20.7bn.

The volume of remortgages in June alone increased by 8.4% compared to a year earlier, as homeowners prepared for the Bank of England’s decision.

Separate IMLA research suggested that more than one in 10 (11%) brokers expect the Bank of England to raise rates again before the end of 2018.

Although the majority see no change, more than a quarter of brokers (28%) predicted the remortgage market will continue to grow significantly in H2.

Elsewhere in the market, the picture was generally positive in Q2 2018, with nearly nine in 10 (88%) of all mortgage applications leading to offers. The vast majority (95%) of brokers reported having a confident outlook for the mortgage industry.

Source: Mortgage Introducer