While activity towards the end of the year slowed, December’s year-on-year figures show a buoyant remortgage market, a new report reveals.
LMS’s Remortgage Report, January 2016 shows that monthly gross remortgage lending fell to £4.3bn in December, a 12% decrease from November's Council of Mortgage Lender’s (CML) figure of £4.9bn.
Nonetheless, this is a 27% rise from December 2014, when remortgage loans accounted for just £3.4bn.
The number of loans recorded in November 2015 was 29,800. December’s figure of 27,567 was therefore a 7% drop from this.
However, continuing the year-on-year trend, December 2015’s number of remortgage loans is still 23% higher than that of December 2014.
Falling broadly in line with average houses prices, the average remortgage loan ranged from £107,863 in Wales to £271,809 in London.
Soaring house prices in London mean that despite remortgaging at the highest levels, Londoners actually have some of the lowest loan-to-value (LTV) mortgages in the UK (51%).
The average East Anglian LTV is also 51%. The North East, however, has the highest LTV at 72%, followed by the North West at 63% LTV.
In six out of 10 regions the average LTV rose. The North East was one region where the average LTV fell, plummeting 6% between November and December.
Similarly, eight out of 10 regions saw an increase in the term of remortgage loans. Wales, however, experienced the biggest fall in typical mortgage term.
Interest rates rose slightly to 2.55% in November 2015, from a record low of 2.52% in October 2015. But November’s interest rate was still lower than the 3.10% interest rate recorded in November 2014.
Regardless of the rise in interest rates, annual repayments fell as a percentage of household income, to 18.4%, after increasing to 19.2% for the first time in 2015 the previous month.
This can be linked to the fact that the average household income for borrowers rose from £46,000 in October 2015 to £46,377 in November 2015, thus reducing the proportion of income that borrowers had to pay each month.
Andy Knee, chief executive of LMS, said:
“Remortgaging activity slowed at the end of the year after a noticeable autumn rush. However, year-on-year figures show the market remains buoyant, with a marked difference from the year before. Rising housing equity and low rates means borrowers are able to withdraw large sums of equity to support Christmas expenses and buy presents for friends and family without dramatically increasing the cost of their loans.
"It's been a rocky start to the year as volatile financial markets, limited economic growth in the UK and a weaker pound take their toll. However, global instability is unlikely to have a significant impact on house prices, and housing equity is set to hit record levels. Mark Carney has also ruled out the likelihood of an interest rate rise until 2017, welcome news to many borrowers.
"It's therefore understandable why people may not think it necessary to remortgage right now. However, as the New Year begins we urge homeowners to take stock of their finances to avoid being caught out when rates do start to rise. Whether this means withdrawing equity to pay off other debts, or fixing to a lower rate to reduce monthly outgoings, an intermediary can be invaluable in advising customers of their best course of action."
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23rd February 2016