Remortgaging fell 17 per cent to £3.3bn in May - the lowest levels since May 2012 - as the average period between remortgaging increased to over five years, according to the latest Legal Marketing Services (LMS) Remortgage report.
The number of remortgage loans fell by 19 per cent to 21,296 in May and by more than a quarter since last year, indicating a cooling market.
This decline could be an impact of the changes implemented by the Mortgage Market Review (MMR), in place since 26 April, which aims to constrain high-risk borrowing.
Andy Knee, chief executive of LMS, said, “Remortgaging continues to lead the market slowdown as lenders tighten their lending criteria, pre-empting any government cap to tackle concerns about an overheated mortgage market.
“Some customers have been put off by the less competitive rates on offer, as lenders raise rates to give themselves some breathing space and get to grips with the MMR.”
He added, “We expect remortgage lending to recover strongly in the months ahead when lenders fully adjust to the system, rates improve and a base rate move happens.”
Equity released from remortgaging totalled £484m in May, an increase from £426m in April. Remortgage borrowers released £22,642 in equity in May, up 44 per cent from April.
Daniel Bailey, mortgage broker at Derbyshire-based Middleton Finance, said, “Our lifestyles and spending habits have never been as scrutinised as much by lenders as they now. Gym memberships, subscriptions, childcare, shopping, travel, they are all being looked at in more detail and all have an impact on the amount you can borrow.”
“The MMR is relatively new and we need to give it time to settle. It has had an effect on the amount you can borrow, but given time common sense will prevail and we will continue to see good lending. No one wants to return to the reckless days,” Mr Bailey continued.
