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Remortgage drop in Q2 likely to be trend for next quarter too, says FSA

Remortgage business as a proportion of new lending fell from 38% in Q1 to 34% in Q2 2011, and is set to drop further in the coming months, according to the Financial Services Authority.

The FSA’s latest Mortgage Lending Data report, published last week, shows remortgage lending fell 3.1% between Q1 and Q2, from £12.7bn to £12.3bn, although it remains higher than the £11.1bn seen in Q2 2010.

And in terms of approvals the amount lenders have agreed to advance in the coming months remortgaging’s market share fell from 40% in Q1 to 31% in Q2. The value of approvals for remortgaging dropped 13% in Q2 to £12.4bn, the first quarterly fall since the end of 2009.

Ray Boulger, senior technical manager at John Charcol, says the fact that remortgage approvals are down suggests activity is unlikely to pick up in the next quarter.

But he adds: “Although it looks like the base rate is going to remain at 0.5% until at least 2013, there are still remortgage opportunities out there for brokers because the cost of a fixed rate has come down to a level that most borrowers are prepared to pay.”
Figures from the Council of Mortgage Lenders last week showed that remortgage lending in July was up 11% both by volume and value compared with the same month last year.

There were 31,500 loans for remortgage worth £4bn in July, up 1% by volume and 5% by value compared with June, but the CML warned that this trend would not necessarily last.

The FSA data also shows lenders advanced £37bn in mortgages in Q2, up 11% on Q1’s figure and almost unchanged on Q2 2010.
Approvals totalled £40bn in Q2, up 13% on Q1 but down 3% on the same period last year.

Buy-to-let as a proportion of new lending increased for the third consecutive quarter to account for 8.9% of lending in Q2.

And in value terms, buy-to-let lending increased by 19% to reach £3.2bn in Q2, the largest quarterly lending figure since Q4 2008.

Boulger adds: “I would expect buy-to-let lending to continue to rise at its current rate as the factors driving this sector are not going to go away.

“For instance, while the number of mortgage products available to first-time buyers is increasing, a significant proportion of people are still struggling to obtain mortgage finance, which will keep rental demand high.”


Remortgaging funds portfolio growth

Landlords raising capital to finance the expansion of their portfolios are behind a rise in buy-to-let remortgage activity, according to Paragon Mortgages. Council of Mortgage Lenders data shows remortgaging accounted for more than two-thirds of a 21% increase in buy-to-let gross lending between Q1 and Q2, and Paragon says capital raising was the primary motivation […]


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