Quarterly survey shows healthy remortgage markets

The latest quarterly UK mortgage borrowing trends survey published by My Mortgage Direct reveals a healthy remortgage market and a boom time for builders.

Paul Hearnden, managing director of My Mortgage Direct, says: “One of the reasons behind this positive news is that home owners are choosing the more cost effective option of increasing their borrowings to pay for home improvements and extensions rather than moving to larger properties.”

Equally pertinent is the fact that many home owners are coming to the end of particularly low two year fixed rates and are eager to find comparable deals.

Hearnden adds: “Overall, the market is becalmed. Many economists cannot agree on the likelihood of a decrease in interest rates but they are all agreed that whatever changes may happen in the next year or so they will not be big.

“However, the sleepy nature of the market does appear to have had one particularly positive effect.

“One noticeable and long-awaited change in borrowers attitude is a reversal of the alarming trend towards interest only mortgage. We have experienced a slow but steady trend towards repayment mortgages in the last quarter, which is good news as it means home owners will be less vulnerable in terms of their debt/equity ratios.”

Stamp duty thresholds, the Achilles Heel of the housing market, have not surprisingly remained the main cause of stagnation in the movers and first-time buyers markets. Home owners on all rungs of the property ladder are still feeling unable to climb higher because of this tax.

Meanwhile, prices have continued to stagnate below the 250,000 barrier and houses priced just above it are proving harder to sell.

Likewise, the first-time buyer market continues to be lacklustre, even with the recent reduction in base rates. The increase in the starting threshold to 120,000 has appeared to have made very little difference, particularly in the southern half of the country.

All the attention shown to the buy-to-let market in light of the impending SIPPs legislation does not yet seem to have resulted in a noticeable increase in borrowing.

Hearnden says: “Despite the recent attempts of lenders to lower the rental calculations this can still be a sticking point for many people as surveyors reflect the unenthusiastic nature of the market and remain conservative in rental valuations.”