L&G forecasts big hit to remortgage market

7 January 2009

L&G’s Mortgage Purchase Index for Q4 2008 shows that 17% fewer borrowers took up a variable rate than in Q3, despite the recent cuts to base rate.

The data, which is based on 18,683 mortgage applications through L&G’s mortgage club, also shows 65% of borrowers chose a fixed rate deal during Q4. This is marginally up from the 63% recorded for the previous three months.

The research also shows that the average two-year fixed rate for Q4 was 5.90%, down from 6.38% in Q3.

Stephen Smith, director of housing at L&G, says that with SVRs being so cheap this will have a dramatic impact on remortgaging business.

He says: “Clearly, cheaper rates will mean some people avoid payment difficulties. But rates are now at such spectacularly low levels that the incentive to remortgage for borrowers may be vastly reduced.

“If the ‘go to’ rate which a customer is going to pay at the end of a ‘deal’ period is under 4%, then customers might just decide to stay there. We think, as a result, that the remortgage market will take a big hit next year.”