Remortgages at lowest proportion of market for a decade

Remortgaging accounted for only 25% of loans in August, the lowest proportion in over 10 years, the latest survey data from the Council of Mortgage Lenders shows.

August saw 25,000 remortgage loans, worth £3bn, advanced by lenders with numbers down 13% and the value down 14% from July and 19% lower than a year ago.

With interest rates expected to remain low for some time yet, there is little incentive for borrowers to move from low rates and tight credit conditions mean some find it difficult to find another deal.

There were 51,600 house purchase loans, worth £7.7bn, advanced in August, a fall of 8%, by volume and value, compared to July.

The CML says that while this is in line with the usual summer lull in market activity, a rise of 3% by volume and 12% by value from August 2009 shows that 2010 house purchase lending is still proving slightly more robust than the low levels last year.

The 18,300 loans, worth £2.3bn, advanced to first-time buyers in August represented a decline of 5% by volume and 4% by value from July.

First-time buyer loans were also down 3% by number, but up 5% by value, compared with August last year.

First-time buyers in August put down on average a 21% deposit, compared to 24% in July.

Home movers suffered more than first-time buyers from the summer lull in August with the 33,200 loans, worth £5.4bn, advanced down 10% by volume and value on July and average deposits up from 33% in July to 34%.

This saw movers in August borrowing at the lowest LTVs for six years.

But lending levels have improved on last year with home-mover loans 7% up by volume and 13% up by value from August 2009.

Fixed-rate products are enjoying a slow shift back to popularity with 52% of new borrowers opting for one in August, up from 51% in July.

This is still far below 2009, when in July the proportion of new fixed-rate mortgages hit 80% but started to wane in popularity straight after.

Michael Coogan, director-general of the CML, says August is a traditionally a slow month and with a quiet market expected for some time to come.

He says: “While we do not know what the impact of the comprehensive spending review will be on our sector, it will clearly contain austerity measures that will likely further dampen consumers’ appetite to borrow.

“We would expect lending to slow more significantly, year on year, as we head towards the end of the year, and it is unlikely that the uncertain environment will encourage a tick up of mortgage activity in 2011.