Remortgaging is quickly becoming the dominant activity in the lending market, says John Bagshaw, corporate services director of Connells Survey & Valuation.
The proportion of remortgage valuations has risen 3 percentage points year-on-year to make up 37% of the entire market. And Connells says the growth in remortgaging, including buy-to-let remortgaging, has been driven by high levels of competition from lenders who are reducing their rates to try to attract potential borrowers.
Down from 25% last year, the proportion of valuations from people selling their property to buy another has decreased to 21% of the market in August. And Mr Bagshaw said: “Remortgaging is quickly becoming the dominant activity in the lending market. The record high in August was driven by consumers seeking out better value borrowing. Having benefited from a decade of low interest rates, consumers are sensing the risk that this era is nearing an end.
"Many older mortgage deals are expiring this autumn which will mean moving onto more expensive standard variable rates. As a result, homeowners on these deals are opting to refinance, taking advantage of the intense competition in the mortgage market right now.
Despite a slight slowdown in transactions this August, official figures suggest house price growth has held up, he adds. “This rise in property prices means homeowners could now get a better loan-to-value ratio when remortgaging than when they first borrowed – potentially allowing them to lower monthly repayments. With so much economic uncertainty and hints of a base rate rise, many are choosing to lock into a lower rate to see them through the next few years.
“With RICS reporting a shortage of properties on estate agents books, some potential home movers can’t see their next home as they’re scrolling through the various property portals. That doesn’t mean people don’t want to move – there is still demand from first-time buyers, as well as people moving jobs or starting a family and looking to move up the ladder.
“But with house prices still rising – even if it’s at a slower rate – many homeowners have drifted up a stamp duty band since they first bought their home. This means those at the higher end of the market are facing larger bills if they’re looking to move or downsize. As the average stamp duty bill now stands at around £6,000 – it’s far less affordable to move than it used to be because salary growth hasn’t kept up with property prices. Of course, addressing the chronic shortage of homes by boosting house building would fix most of the issues in the property market.”