Remortgaging picks up

The number of borrowers looking to switch to a new mortgage and/or lender has increased for three consecutive months, according to mortgage brokerage John Charcol.

The latest John Charcol monthly index shows the market share accounted for by remortgages has risen to almost 50%.

This is a big change from last year, when the vast amount of mortgages being written were for purchases, as very few existing borrowers were changing their deals.

The Index also shows that more borrowers are beginning to opt for fixed rate deals.

Ray Boulger, senior technical manager at John Charcol, says:

“Purchases took only 47.3% of mortgages sold by John Charcol in February, down from a peak of 58.5% in November. The February figure is the lowest market share taken by purchases since April of last year and provides evidence that activity in the remortgage market has bottomed out.

“After the normal seasonal lull in December John Charcol placed significantly more business in January and February, adding to the other evidence that the downturn in mortgage approvals and lending reported by the Bank of England and the Council of Mortgage Lenders for January will be reversed when the February figures are released.”

Boulger explains that activity has increased overall, with more people taking out mortgages to buy property and more existing borrowers looking to remortgage. But the growth in remortgages has been more marked than the purchase market.

Interestingly, The John Charcol index shows that the significant upturn in remortgage activity is largely due to an increase in buy-to-let remortgage, with more and more landlords refinancing their deals or changing lenders.

Boulger believes this means that “it is too early to be confident of an ongoing increase in remortgage activity” in the mainstream market as a result.

However, he points to a number of elements which indicate that residential remortgaging has passed its low point: there is more competition and lower interest rates available thanks to a slight fall in the cost of funding for some lenders; some building societies have increased their standard variable rates, prompting borrowers to move their deals; there are far more competitive deals available now at 85% and 90% loan to value than there were last year; the increase in house prices since last summer means more people have enough equity in their homes to enable them to remortgage.