Purchasing up, remortgaging down in August
Last month's mortgage figures were released today, and they're interesting. Not for what they say overall, but for what lies underneath.
Gross mortgage lending totalled an estimated £12.6 billion in August, according to the Council of Mortgage Lenders. This is 13 per cent lower than July's revised total of £14.5 billion, but that's probably seasonal: lending usually dips in August, even in boom years.
What's interesting is the disparity between different types of lending. Loans for house purchases have actually increased--but it doesn't show in the overall figures because of a drop in remortgaging.
The ongoing lull in remortgage activity has taken most of the fizz out of gross lending figures, since it used to account for around a third of mortgages issued. Last August, a flurry of remortgaging contributed to gross lending figures of £19.9 billion, as householders worried about the prospect of steeply increasing rates (that was before the succession of large cuts).
And nobody expects the remortgage lull to cease any time soon. Present market conditions aren't changing in a hurry, so borrowers find themselves in one of two camps:
1. Can't Remortgage
- they're tied in to a fixed rate
- minimum equity requirements are higher (typically 20%)
- there are no cheap loans on the higher-LTV mortgages
- they're in negative equity already
2. Don't Need To Remortgage
- falling prices mean there's no extra equity to release
- SVR rates are historically low, thanks very much!
There are no quick answers for the first camp. Time will be the healer in all four cases: they either wait out their tie-in period, wait on the lending market to loosen, or wait for the buying market to start boosting their homes' values again (the latter two are, of course, strongly linked).
Likewise, until interest rates go up, the second camp has no incentive to look at an alternative loan... and with the economy still in the doldrums, nobody's wishing interest rates upward at the moment.
So, August's figures aren't as straightforward as they seem, and we'd like to see a bit more press focus on the growth in new mortgages for purchases. The overall figures don't tell the full story at all!