Following on from an increase in remortgage lending in September and October, figures dropped to a 13 year low in December last, according to the latest LMS report.
However, the market is expected to recover in 2013 with the assistance of the funding for lending scheme.
Monthly gross remortgage lending fell by £404 million in December to £2.7 billion, down 13 per cent on the £3.1 billion reported by the Council for Mortgage Lenders (CML) for November.
Mortgage lending as a whole also fell, according to the CML, with a decline of 9.3 per cent to £11.7 billion in December.
The £2.7bn of gross remortgage lending in December is 13 per cent lower than in November and 24.7 per cent lower than the same time in 2011. December’s figure was not only the lowest recorded in 2012 but again, is the lowest monthly value since the end of 1999. This stagnation is reflected across the mortgage market and can, in part, be attributed to a seasonal lull in homeowner activity.
LMS estimates that the total number of remortgage loans advanced fell by 14.2 per cent to 19,279 in December, down from 22,470 in November.
However, the average remortgage loan amount increased for the fifth consecutive month in December, rising by £1,980 to £140,553, 6.1 per cent higher than the same time in 2011 (£132,528) and the highest it has been since January 2009 (£143,126). While total lending is down, those remortgaging are borrowing more.
Andy Knee, Chief Executive of LMS said: “The remortgage market contracted in 2012, owing to exceptionally low levels of activity in the second half of the year. As we predicted, there were a total of 310,000 transactions last year, down from 374,000 in 2011 with the total value of these loans falling to its lowest level since 2005 at £2.7bn.
“The drop in activity in the second half of 2012 was widely anticipated, this being a lull before the full introduction of the Funding for Lending Scheme (FLS) which is widely expected to bring a pick up to the mortgage market in 2013. December’s drop can also be attributed to savvy homeowners holding off for more competitive products in the New Year combined with the normal seasonal lull in activity in the months leading up to Christmas.
We expect FLS to increase competition between lenders and this should result in better deals for the mortgage customers and a restoration of growth in the market in 2013.”
CML director general Paul Smee said that the funding for lending scheme would encourage a downward drift in interest rates and “may prompt an increase in remortgage activity as borrowers seek to take advantage of lower rates.”
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