Remortgage market sees July boost
Date online: 20/08/2014
In contrast, purchase applications fell 4% from June as the homebuyer market experienced a summer slump.
This reverses the trend since the beginning of the year, with purchase application volumes having consistently shown greater month-on-month growth than remortgages during the first six months of 2014.
Data from over 550 brokers and 900 estate agents also shows the typical value of a property being remortgaged reached £310,646 in July, having surpassed £300,000 in May 2014 (£306,128) for the first time in five and a half years since January 2009 – when the Index began tracking this data.
This latest figure for July 2014 is 18% higher than July 2013’s average of £264,210, compared with a 10% rise in the average price of properties on the purchase market over the same period, from £214,457 in July 2013 to £235,034.
While property prices have risen across the board over the past year, the faster rise in the value of homes being remortgaged suggests the surge of interest in remortgaging among existing homeowners is also influenced by those with more valuable homes returning to the market and looking to improve on their existing deal before interest rates rise.
Since July 2013, the average remortgage loan-to-value has fallen from 58.5% in July 2013 to 54.3%: a decrease of 4.2 percentage points. This means homeowners are remortgaging with a significantly higher proportion of equity behind them.
Current homeowners put forward 30% more equity in July in comparison to last year (£141,984 versus £109,600 in July 2013), leaving remortgagers in a much better position to access preferential mortgage rates.
The primary salary of remortgage applicants in July was £46,900, up by 7% year-on-year from £43,785: another sign of wealthier homeowners returning to the market in search of a better deal.
Despite increased remortgage activity, the rush to lock into fixed-rate deals has slowed considerably since June, when 93.0% of remortgagers opted to fix.
In July, just 89.0% of homeowners looking to remortgage chose a fixed-rate product, down 4 percentage points in a month and 2 percentage points year-on-year (from 91%). In comparison, 95.0% of purchase applicants opted to fix, up from 94.5% in June and 93.6% in July 2013.
July also saw average fixed mortgage rates continue to rise as lenders put up their prices in anticipation of a base rate hike. The price of three-year fixed deals increased the most between June and July, returning to the January 2014 average.
The average pricing of five year products has now risen almost twice as much as two year products since the start of the year (28bps vs. 15bps). In comparison, two year tracker rates have fallen from 2.88% to 2.77% since January.
Brian Murphy, head of lending at Mortgage Advice Bureau, comments:
“The resurgence of remortgage activity in July has been long-awaited, having lagged behind purchase applications since the start of the year. Improved property prices and a boost in housing equity mean current homeowners are in an ideal position to seek a better deal on their mortgage and are prompting the return of wealthier homeowners to the market.
“While average rates are slowly edging upwards, they continue to offer excellent value for money compared to historic levels. A likely rise in interest rates will also prompt many homeowners to reconsider their options and lock into preferential rates before a base rate rise takes hold.
“Now is the perfect time for many current homeowners to review their options and seek out a better mortgage deal. However, in a rapidly growing market, it’s easy to get lost in the vast number of products on offer. Speaking to an independent mortgage broker can make the process much faster and simpler by giving consumers access to the widest choice of deals available."