Remortgage activity begins to recover
The main stories from the John Charcol Index for the first two months of 2010 are the beginning of a revival in the remortgage market and the stabilization of fixed rate take up, but at the very low level of around 20%. The John Charcol Index revealed that the market share taken by remortgages (including product transfers) increased for the third month running and the dramatic fall in the take up of fixed rates since the middle of last year has come to an end.
The remortgage market returns
"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," comments Ray Boulger of John Charcol.
"Both purchase and remortgage activity has increased this year, but remortgages have increased more. However, detailed analysis of the figures shows that all of the increase in remortgage activity over the last two months is due to a particularly sharp increase in Buy to Let remortgages. Therefore, although mortgage rates have been steadily improving over the last few months, and in the residential market there are now even decent rates available up to 85% LTV - which makes remortgaging worthwhile for many more people - it is too early to be confident of an ongoing increase in remortgage activity. Nevertheless there are good reasons to think that the decline in remortgage activity has reached its nadir for the following reasons:
More competition and a modest reduction in some funding costs for lenders resulting in lower rates for both new fixed and tracker mortgages.
Several building societies increasing their SVRs, which also focused attention on the fact that many SVRs are over 5%.
A significant improvement in the rates and choice available to borrowers with only 15% or 20% equity in their property.
The bounce in property prices since the low nadir early last year, increasing some borrowers' equity sufficiently to make remortgaging worthwhile.
Most, and maybe all, of these factors are likely to continue to influence the market in 2010.
"Whilst the 80/20 split between variable and fixed may seem dramatic, trackers have certainly offered the better value since the middle of last year, although a caveat now is that the political risk, particularly of a hung parliament, can't be ignored. It is also worth noting that due to the market reassessing the future path of interest rates the gap between fixed and tracker pricing has narrowed recently. If this trend continues fixed rates may well come more into the reckoning in the not too distant future," concludes Ray Boulger.