The number of residential and buy-to-let mortgages taken out in June 2019 has fallen as has pound-for-pound remortgaging, according to UK Finance. The mortgage trends update also showed that there was a ten per cent drop in overall remortgaging activity in June 2019, compared to the previous year. This has been driven largely by a fall in pound-for-pound remortgages, contrasting with a year-on-year rise in remortgages with additional borrowing.
UK Finance’s report says that remortgaging activity can be volatile and there are often significant variations from month to month (see chart below). For example, last month saw a 20 per cent rise year-on-year in overall remortgaging, with growth in both the number of pound-to-pound mortgages and those with additional borrowing. Overall, the trend for remortgaging in recent years has been an upward one
Remortgaging is also cyclical and dependent on the maturing of fixed-term deals, meaning it is impacted by borrower behaviour from two and five years ago. Due to low interest rates and a competitive market, with more borrowers shifting towards taking out a five-year fixed rate mortgage, both when buying a house or when remortgaging to a new deal. In June 2018, the number of five-year fixed rate mortgages overtook the number of two-year deals for the first time. This trend has continued into 2019, with five-year fixes remaining the most popular product options for new mortgages.
This, coupled with some borrowers locking into attractive rates early, may have contributed to the slight drop in the number of homeowner mortgage deals coming to an end, with 400,000 ending in Q2 2019 compared to 440,000 in Q2 2018.
Product transfers become more popular, with 1.2 million borrowers last year opting to switch product internally with their existing provider. This is in addition to 460,000 remortgages. This suggests that many of those who would traditionally have taken out a pound-for-pound remortgage are instead now switching products internally. UK Finance’s latest product transfer data for Q2 2019 is due to be published on 23 August and will give an indication of whether further growth in product transfers could also be driving the recent fall in pound-for-pound remortgaging.
UK Finance says that overall, when there has been a substantial change in figures, it’s important to examine the broader reasons why these changes might have occurred – and not to take a single month’s data at face value.
Daniel Hegarty, CEO and Founder at Habito, the online mortgage broker and lender said “Even accounting for a seasonal lull, mortgage lending in June was down across nearly all buyer-types including first-time buyers, home-movers and buy-to-let landlords, year-on-year for June. It’s really no surprise given the current political and economic uncertainty that the only area of growth in lending is from homeowners remortgaging for additional borrowing (up 8.3%) as homeowners look to hunker down, get their finances in order and improve, not move.”
“Flat property prices don’t seem enough to tempt people to look in estate agents’ windows. Stamp duty is a hefty charge on top of the purchase price, plus other extras such as estate agent fees and conveyancing fees make the average cost of just moving home around £11,000. In this climate, it’s no wonder that many people are opting to remortgage to release the money to extend or improve their home instead. ”
“For many people, remortgaging is a way to realise the dream of upsizing for more space either by extending into the loft, building a conservatory or even digging out the basement. Even small improvements such as an update to a kitchen, bathroom or garden can add value to your home and improve a family’s quality of life.”
Dave Harris, CEO of equity release lender, more 2 life said “Today’s figures from UK Finance show that re-mortgaging continues to be an attractive option for homeowners. With the current economic and political uncertainty, some borrowers are adopting a ‘wait and see’ approach to buying and selling, so re-mortgaging to improve an existing property is becoming increasingly popular.”
“Older homeowners, in particular, may find their home needs to be adapted to suit their changing circumstances during later life. Equity release is one form of borrowing that has increased in popularity amongst homeowners for this very reason, as it allows borrowers to stay in the home they know and love. Indeed, according to Key’s recent Market Monitor 64% of people who take out equity release use it for home improvements.”
“As ever, getting advice is vital for anyone looking to unlock the wealth tied up in their homes. With more homeowners considering equity release as a way of enhancing and adding value to their home, advisers will be key in pointing them in the right direction and providing them with the best solution for their particular needs.”
Mark Gordon, Director of Mortgages, comparethemarket.com said “First-time buyer numbers have declined slightly, but this group continues to drive activity in the property market. Would-be home purchasers would appear to be doing all they can to take advantage of low rates and competitive deals. The boom in remortgages, up more than 8% from this time last year, is in line with the initial fixed rate periods coming to an end, suggesting that borrowers are more actively seeking new fixed term deals rather than rolling onto a standard variable rate. There are some great deals available right now so customers should shop around and compare products to find the one that’s best for them”