UK remortgage market remains subdued
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%).