According to the latest data from the Bank of England (BoE) remortgaging numbers plunged from 25,100 in August to 20,600 in September – the lowest level since January 1999.
The reason for this big dip is because ‘remortgaging’ is defined as moving to a completely different lender in a process which involves going through affordability checks.
With homeowners facing higher rates, many have been opting to stay with their current lender – in a process known as a product transfer – when their mortgage deal ends as this avoids having to go through an application and checks.
Ranald Mitchell, director at Norwich-based mortgage broker, Charwin Private Clients, said: “The fact remortgages are at a 24-year low underlines how exposed the average UK household is as people come off ultra-low rates.”
Homebuyer mortgages plunged in September
It wasn’t just remortgaging numbers which have fallen, the BoE, reported the number of mortgages being approved for home purchase fell from 45,400 in August to 43,300 in September – the lowest level since January 2023.
Meanwhile, the amount of borrowing has also fallen from £1.1 billion in August to £0.9 billion in September, according to the BoE. The the amount of interest paid on newly-drawn mortgages went up by 0.19% to hit 5.01%.
Alice Haine, personal finance analyst at BestInvest, said this was a reflection of buyers treading more conservatively by shunning larger family homes in favour of smaller, lower-value homes to meet lenders’ affordability criteria.
“The shift in buyer appetite and uncertain economic outlook is likely to result in further weakening in mortgage lending in the coming months,” she added.
How will the interest rate decision impact mortgages?
Indeed, this data has been released just days before the BoE is due to make its next decision interest rates. Last time its decision makers met they held the Base Rate at 5.25%.
Will they continue with the plateau or will they go back to hiking rates when the next Monetary Policy Committee meeting takes place on Thursday?
Haine said the decision was ‘on a knife edge’ following September’s Consumer Prices Index Inflation reading, which was unchanged at 6.7%.
“If the BoE decides to pause again, it would deliver some early Christmas cheer for first-time buyers and homeowners looking to refinance.”
She added: “There is room for a little optimism, however. Improving interest rate expectations have already fed through to the market, with average two-and five-year fixed rates dropping over the past month as lenders compete more aggressively for business.”
Brokers were also feeling a little more positive than in recent times. Ranald Mitchell said October had seen a significant uptick in activity with a much healthier number of purchase enquiries and an increase in remortgages.
He added: “It appears that people who have stalled on buying a home or moving due to interest rate volatility are all now coming forward, having had time to get acquainted with the new mortgage world we’re now in.
“With house prices down, a sense of opportunism is creeping in despite higher lending costs. It is, after all, very much a buyer’s market at present.”
