In 2012, UK remortgaging activity dropped steeply compared to the levels seen at the start of 2008, showed the latest research on the topic published by Lloyds TSB. Remortgages represented 51% of total mortgage lending between January 2008 and October 2008 and fell last year to only 24%. While lower than 2008 levels, remortgages accounted for a steady 39% from November 2008 to July 2011.
Lloyd's most recent analysis shows standard variable rates (SVRs) may no longer be the best option for borrowers, as since late 2008, falling SVRs offered fewer incentives for borrowers to remortgage, as the gab between them and fixed rate mortgages became less significant. As fixed rates have recently been on a downward trend, this might stimulate a new interest in remortgaging as homeowners might find lower rates.
Overall, the number of remortgages was 12% lower last year than in 2011, but a slight improvement was recorded in the third and fourth quarter. Remortgaging activity has been generally stimulated by borrowers who wanted replace fixed home loans at the end of their term to avoid SVRs, as these were typically more expensive and yielded uncertainty in what monthly payments were concerned. Since August 2011, SVRs have been higher than fixed rates, remortgaging activity has kept its low pace. Yet fixed rates have been decreasing since August 2012, which might stimulate remortgaging in 2013.
‘With SVRs at historically low levels, many home owners have actually found their mortgage payments have reduced at the end of their term and the incentive to remortgage has been reduced,’ said Stephen Noakes, mortgage director at Lloyds TSB. ‘However, as we start to see fixed rates dropping, prudent borrowers taking stock of their home loans could benefit from their monthly payments falling further.’