Remortgage approvals slow as risk of interest rate rise recedes

Remortgage business has fallen 28% in April and will remain subdued, the Council of Mortgage Lenders has warned.

Figures from the trade body released last week show there were 24,700 remortgage loans worth £3bn advanced in April, which is down 28% by number and 27% by value on March’s 34,100 loans worth £4.1bn.

The number of remortgage loans advanced in April is 1% more than April 2010 and unchanged by value.

But the CML says remortgage approvals fell during the month so remortgage completions are likely to remain modest in the near future.

It says that, since remortgage activity is currently linked to expectations of interest rate rises, activity will be subdued because an imminent increase in the bank rate now looks less likely.

David Hollingworth, a mortgage specialist at London & Country, says while rate rise expectations have a significant impact on remortgage activity, the type of products available also affect demand.

He says: “Fixed rates have only recently become more competitive and lenders are now putting a lot of energy into the remortgage market. This may help to arrest the fall shown in the CML figures.”

However, Hollingworth adds that fluctuations in remortgage activity are likely to continue and there will not be a boom in the market until borrowers are spooked into thinking that a base rate rise is imminent.

The data also reveals that loans for house purchase increased by 8% in number and 7% in value in April to 40,900 loans worth £5.9bn. But this represents a fall of 2% both by number and value compared to April 2010.

David Brown, commercial director at LSL Property Services, says: “Any growth in monthly mortgage lending is welcome news for the UK’s army of frustrated home buyers, but a comparison with 2010 shows that we are far from out of the woods.

“You still have to jump through a lot of hoops to get a mortgage.”