More than three quarters of advisers have revealed how difficult it is to ‘port’ a mortgage following the implementation of the Mortgage Market Review.
According to buy-to-let specialist Paragon Mortgages, 28 per cent of intermediaries said it is ‘very difficult’ to port clients’ mortgages while 48 per cent described it as ‘quite difficult’. Around 16 per cent of intermediaries said it is neither easy or difficult, while just 8 per cent said it was ‘quite’ or ‘very easy’.
The MMR means lenders must treat every mortgage sale as advised and are tasked with conducting more thorough affordability assessments, including where existing borrowers move to new terms.
However, changes to the original drafting of the rules in 2012 meant lenders were not required to test affordability for existing borrowers that are porting a mortgage or otherwise moving house and not increasing the size of their outstanding loan.
As a consequence individuals who had previously taken a mortgage out pre-MMR are now unable to meet requirements of lenders now.
Meanwhile Paragon’s research also showed a decline in the number of owner-occupied remortgages in the second quarter, down from 35 per cent in Q1 to 32 per cent in Q2. The level of remortgage business has now halved since pre-crisis levels, the lender added.
The number of buy-to-let remortgage cases has also declined from 34 per cent in Q4 2014 to 29 per cent in Q2 2015. New business for intermediaries remained stable during this period at 22.7 cases in the second quarter.
Around 51 per cent of intermediaries expect levels of buy-to-let mortgage business to stay the same over the next 12 months, while 46 per cent said they expect the level to increase and only 3 per cent expect levels to decline.
The figures come in contrast to recent statistical releases suggesting a pick-up in the remortgaging market, with the British Banking Association stating last month that remortgaging was around 20 per cent higher year-on-year, while in June the Bank of England revealed the number of approvals for remortgaging was 36,003 - compared to the average of 33,090 over the previous six months.
John Heron, managing director of Paragon Mortgages, said: “Although it is disappointing to see a drop in the number of remortgages, it is important to note these are incremental fluctuations and, as whole, when viewed from a broader perspective, the figures remain well within the average range.”
Fixed rate products remain the most commonly selected, accounting for 81 per cent of new mortgages in Q2, while the demand for trackers seen in Q1 has reversed.
Results also show a preference for longer initial terms, with terms of five years or more experiencing the largest increase in popularity, although fixes of two years accounted for over half of mortgage cases (52 per cent).
peter.walker@ft.com
