Remortgage activity reached its highest level since 2009 last month following the Bank of England’s decision to cut the base rate, new figures show.
According to LMS, the number of remortgage loans taken out in August rose 8% to 36,195 – 11,000 more transactions than a year ago.
To help boost growth following the EU referendum the Bank of England cut interest rates in August from 0.50% to 0.25% – the lowest on record. It is the first interest rate cut since 2009, when the financial crisis was at its peak.
However, the overall value of gross remortgage lending fell by 2% from £6.0 billion in July to £5.9 billion in August, as homeowners’ average remortgage loan amount dropped by 6% between July and August from £172,184 to £162,268.
LMS data shows the average remortgage loan-to-value (LTV) fell from 58% in July to 54% in August.
Those who remortgaged in August 2016 released £31,589, 11% less than in August 2015 when the average amount released stood at £35,590.
In line with the growth in activity, there are signs of that homeowners are remortgaging more often as the incentive to do so grows. In August 2015, the average remortgager had held their previous mortgage for a period of five years and three months.
However, August 2016 saw this reduced by eight months to four years and seven months as people are motivated to reassess their current deal.
Andy Knee, chief executive of LMS, said: “The Bank of England’s decision to cut the base interest rate continues to have a positive impact on the remortgage market. Mortgage interest rates had already fallen to record lows, which along with rising house prices has encouraged a greater number of homeowners to remortgage their homes. Indeed, last month saw the highest number of remortgages for seven years.
“However, in spite of this rise, homeowners appear to be in a more cautious mood than last month: borrowing less in the wake of a couple of turbulent months, both politically and economically, and lowering their LTV in the process. This means, despite a greater level of activity, the value of gross remortgage lending has fallen for the first time since May 2016.
“A year ago, homeowners who remortgaged had waited over five years to do so since they took out their previous loan. In many cases, that length of time will have made a world of difference to the interest rates that are available on the market and the value of their homes.
“With today’s favourable conditions, it is no surprise to see eight months shaved off the average time that people wait to remortgage and there is plenty of incentive for more people to consider acting before the year is out.”
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