Remortgaging bolsters lending growth

Remortgaging bolsters lending growth

Remortgaging led the growth in gross mortgage lending in June as overall mortgage approvals dropped compared with the same time last year, according to UK Finance.

The trade association's latest household finance update for June showed remortgage approvals rose 3.4 per cent year on year, from 28,832 in June 2017 to 29,819 last month.

Eric Leenders, managing director of personal finance at UK Finance, attributed the drive to borrowers taking advantage of attractive deals ahead of an anticipated bank rate rise.

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In March, UK Finance reported remortgage levels had hit a nine-year high at the beginning of this year - levels which exceeded seasonal fluctuations and were also attributed to expectations of a rate rise at the time.

UK interest rates have been held at record lows and as recently as June the market was pricing a 60 per cent chance of an interest rate rise in August.

But this would have been hampered by recent political turmoil around Brexit, which saw a number of high profile resignations.

Since June 2017 there has also been a 2.1 per cent fall in overall mortgage approvals by main high street banks, with remortgage growth offset by house purchase approvals dropping 4.7 per cent year on year, from 49,527 to 47,175.

Mortgage approval rates are interpreted to reflect homebuyer activity in the market and are a forward indicator of lending in future months.

Despite this drop in approvals, the estimated gross mortgage lending for the total market in June rose to £23.5bn - an increase of 2.2 per cent from June 2017’s figure of £23bn.

High street banks accounted for £14.2bn of last month’s gross mortgage lending.

John Goodall, chief executive of buy-to-let specialist Landbay, said while overall lending grew, subdued activity among home movers cannot be ignored. 

He said: "Rising house prices and substantial stamp duty costs have stumbled the market and sales remain significantly low.

"All eyes are now on the new housing minister to offer a long term plan for growth in the market, including concrete plans for greater construction to enhance affordability and encourage movement in the market."

Earlier this month, Kit Malthouse replaced Dominic Raab as minister of state for housing - the eighth minister in the role in eight years.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said whilst remortgaging continued to drive the mortgage market in June it remains to be seen whether that will be the case to such an extent going forward now that an August interest rate rise is looking very unlikely.

He said: "There are still plenty of attractive deals to tempt borrowers with lenders offering some great summer sizzler mortgage products that should give a welcome boost to the housing market over the coming months.

"Five-year fixed rates, in particular, are still very competitive with a number pegged at less than 2 per cent, providing security from potential rate rises over the medium term."