Record low interest rates, a rise in the number of mortgage deals available and strong competition between lenders has resulted in a rise in mortgage applications in the UK. However, new figures have found that while the number of deals for homebuyers is increasing, remortgage levels have plummeted to their lowest level since 1998.
Figures from the British Bankers' Association (BBA) show that just 13,696 remortgages were approved during January 2013, the lowest number since January 1998 and just a sixth of the number recorded in March 2004. So with rates at a record low, why are so few people remortgaging?
Low house prices and SVRs putting people off remortgaging
Recently, fixed rates in the UK have fallen to historic lows. With two-year fixed rates under 2% and five-year deals under 3%, it's a surprise that so few people are choosing to switch their mortgage deal.
Mortgage expert David Hollingworth told the Daily Telegraph: "There will be some people who are on very low tracker rates or on a low standard variable rate, perhaps 2% over base rate, who will think it is not worth remortgaging."
Many millions of borrowers in the UK sit on their lender's standard variable rate (SVR). Some SVRs are linked to the base rate and so, for many people, it simply isn't cost effective to remortgage. Others, however, have seen their SVR rise and so would be advised to shop around for another deal.
"Over a million borrowers saw their standard variable rate and their repayments rise in 2012," says Keith Osborne, editor of whathouse.co.uk. "So, now could be the time for these borrowers to reassess their mortgage arrangements and see if they can benefit from a better deal."
Another reason why the number of remortgages has fallen to a 15-year low is the stagnant state of the UK housing market. Hollingsworth adds: "There will also be people who are looking at their property and thinking the value has gone backwards, so they are not in a position to move to one of these deals for people with a lot of equity."
Osborne agrees. He said: "If your home has decreased in value, your loan-to-value may now be higher than it was when you took your mortgage deal out. With fewer competitive deals available for borrowers at a higher loan-to-value - typically 80% or more - it could simply be the case that there isn't a low-rate deal for you to move to."
Mortgage broker Mark Harris told the Daily Telegraph that he was surprised that remortgage numbers were so low, considering the record deals on offer. "Of course, there is a lag between the positive press coverage of such deals and the time it takes to get one of these, so we expect to see these numbers improve as the year goes on."
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