UK re­mort­gage mar­ket re­mains sub­dued

The Pak Banker - - 6BUSINESS -

Ac­cord­ing to the lat­est anal­y­sis from Lloyds TSB, bor­row­ers may no longer be bet­ter off stay­ing on stan­dard vari­able rates (SVRs). Since late 2008, fall­ing SVRs less­ened the gap with fixed rate mort­gages and sig­nif­i­cantly re­duced the in­cen­tive for many bor­row­ers to re­mort­gage. How­ever, given the re­cent fall in fixed rates, some homeowners may find a bet­ter rate by re­mort­gag­ing.

At the end of 2012, re­mort­gag­ing ac­tiv­ity in the UK was just a quar­ter (24%) of the lev­els at the start of 2008. Be­tween Jan­uary 2008 and Oc­to­ber 2008, the num- ber of re­mort­gages ac­counted (51%) of to­tal mort­gage lend­ing.

From Novem­ber 2008 to July 2011 the num­ber of re­mort­gages ac­counted for two fifths (39%) of to­tal mort­gage lend­ing whilst fixed rates were on av­er­age above SVR. Since the end of last sum­mer there has been a slight re­vival in re­mort­gage ac­tiv­ity (ris­ing by 7% Q4 on Q3) as av­er­age fixed rates fell be­low the av­er­age SVR. Lloyds TSB is on hand to help with re­mort­gage rates re­duced by up to 0.25%, a free switch­ing ser­vice and £500 cash back for cur­rent ac­count cus­tomers. His­tor­i­cally, re­mort­gage ac­tiv­ity has typ­i­cally been driven by bor­row­ers re­plac­ing their fixed home


half loans at the end of their term to avoid mov­ing on to an SVR. This is be­cause SVRs, on the whole, were more ex­pen­sive and brought un­cer­tainty over fu­ture monthly pay­ments. How­ever, this changed in re­cent years as in­ter­est rates fell to an all time low. SVR on the rise, fixed rates on the fall Even though SVR rates have gen­er­ally been higher than fixed rates since Au­gust 2011, re­mort­gag­ing ac­tiv­ity on the whole has re­mained sub­dued, av­er­ag­ing 29,700 per month (37% of to­tal mort­gage lend­ing). Over this pe­riod, the av­er­age SVR rate was 24bps more than av­er­age fixed rates (Fixed rates 3.96%; SVR 4.20%).

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