Re-mortgaging hits record low in September

The latest data from the Mortgage Advice Bureau reveals that re-mortgages made up only 28.9% of mortgage applications in September 2009. This compares to 59.3% of all mortgage applications in September 2008, a drop of more than 30% in a year. September was also the 9th consecutive month in which re-mortgage applications, as a percentage of all applications, have fallen.

Although re-mortgage levels dropped in September, the total percentage of mortgage applications actually increased by 13% last month compared to August, and purchases were up by a significant 15.3%, with first time buyer applications increasing by 6.4% over the same period.

However, mortgage applications in September were still 21% and 38% down on September 2008 and 2007 levels respectively.

While the average loan to value (LTV) remained below 70% in September (69%), despite rising by 2% from August (67%), the average mortgage loan amount increased from £111,589 in August to £121,159 in September, an increase of 8.6%. The average mortgage loan in Q3 2009 was £115,902 compared to £112,859 in Q2 2009, an increase of 2.7%.

Mortgage Advice Bureau reported in its September mortgage watch, that fixed rate mortgages remain the overwhelming choice for both homebuyers and homeowners seeking to remortgage. The latest figures, however, show that September witnessed a retreat in the appetite for fixed rate deals with a 6% rise in variable rate products compared to August. This increase may be due to the general feeling that interest rates could well stay at record low levels for some time yet.

Brian Murphy, head of lending, Mortgage Advice Bureau, comments: “These latest figures show that lenders still remain extremely cautious with the best deals being largely focussed on borrowers with significant deposits and/or equity. Many would be re-mortgage borrowers are unable to switch due to little or no equity in their properties. As a consequence, many are reverting to their lenders standard variable rates, which in many instances currently offer good value. The dilemma for many will be, if and when interest rates do rise, the effect that those rises will have on their ability to service their mortgages if they are unable to re-mortgage to more attractive rates.

“Activity amongst house purchase customers picked up in September following a slight lull during the summer holiday period and suggests that those who can and want to move are taking advantage of property prices that offer good value compared with two years ago combined with some very attractive mortgage deals.

“The purchase market is likely to remain constrained due to a lack of appetite amongst lenders to engage the high loan to value sector and this is understandable given the higher risk that this business poses for lenders. While these conditions exist, and with unemployment forecast to continue rising well into next year, activity in the market is likely to remain flat.

“On a more positive note, we have seen some quite marked reductions in product pricing in recent weeks with a number of the major high street lenders entering into an element of competition with each other, although this is largely in the 70% loan to value sector. We have also seen an increase in the overall supply of mortgage products that intermediaries can typically access and this is good news as competition generally means better value for borrowers.”