Signs of revival in mortgage market according to latest independent index

Written by Ray Clancy

Thursday, 11 March 2010 09:21

A revival in the remortgage market and a stabilisation of fixed rate take up is taking place but it is still too early to be confident, according to the latest analysis from independent brokers John Charcol.
Its index for the first two months of 2010 shows that the market share taken by remortgages, including product transfers, increased for the third month running and the dramatic fall in the take up of fixed rates since the middle of last year has come to an end.

Purchases took only 47.3% of mortgages sold by John Charcol in February, down from a peak of 58.5% in November. The February figure is the lowest market share taken by purchases since April of last year and provides evidence that activity in the remortgage market has bottomed out.

‘After the normal seasonal lull in December John Charcol placed significantly more business in January and February, adding to the other evidence that the downturn in mortgage approvals and lending reported by the Bank of England and the Council of Mortgage Lenders for January will be reversed when the February figures are released,’ said spokesman Ray Boulger.

‘Both purchase and remortgage activity has increased this year, but remortgages have increased more. However, detailed analysis of the figures shows that all of the increase in remortgage activity over the last two months is due to a particularly sharp increase in Buy to Let remortgages,’ he explained.

‘Therefore, although mortgage rates have been steadily improving over the last few months, and in the residential market there are now even decent rates available up to 85% LTV, which makes remortgaging worthwhile for many more people, it is too early to be confident of an ongoing increase in remortgage activity,’ he added.

Analysts believe there are good reasons to think that the decline in remortgage activity has reached its nadir as more competition and a modest reduction in some funding costs for lenders is resulting in lower rates for both new fixed and tracker mortgages, several building societies are increasing their SVRs, and there is a significant improvement in the rates and choice available to borrowers with only 15% or 20% equity in their property.

The bounce in property prices since the low nadir early last year, increasing some borrowers' equity sufficiently to make remortgaging worthwhile, the index points out.
Most, and maybe all, of these factors are likely to continue to influence the market in 2010.

‘It is also worth noting that due to the market reassessing the future path of interest rates the gap between fixed and tracker pricing has narrowed recently. If this trend continues fixed rates may well come more into the reckoning in the not too distant future,’ said Boulger.

With the date of the Budget now confirmed as 24 March, the Council of Mortgage Lenders is urging the government to commit to the ongoing funding of measures to help borrowers in financial difficulty.

The CML also urges the government to use the Budget to announce how it will work with the industry to address the market implications of lenders repaying the £300 billion support given under the Special Liquidity Scheme and the Credit Guarantee Scheme and to clarify how it will address growing demand for affordable housing in both home-ownership and rental tenures, against the backdrop of fiscal cutbacks.

‘We call on the leaders of all political parties to commit to prioritise spending on housing in the coming years, at a time when we recognise difficult investment choices will have to be made in the next comprehensive spending review. Housing can be a driver of economic recovery, but the lack of it contributes to a wide range of social problems,’ it said.